By Lyndsey Hall
November 25th will see the first all-Tory Autumn Statement for almost 20 years, and it’s already looking to be a game changer. Here’s what we expect to see in today’s Spending Review:
After an embarrassing defeat by the House of Lords, Osborne is expected to announce a reviewed proposal for lowering tax credits. The original proposed cuts would have reduced spending on working tax credit and child credit by £4.4billion, leaving many families up to £1,300 worse off per year; which raised fierce opposition from the peers. The Chancellor could choose to introduce the cuts more gradually, adjust them to affect fewer people, or announce measures to offset the blow for those worst affected.
We could see a 2p increase in diesel duty, according to reports, in the wake of the Volkswagen emissions scandal. However, FairFuel UK recommend duty should actually be cut by 3p per litre for both petrol and diesel as the UK has one of the highest duties in Europe.
Osborne may reduce the higher rate Stamp Duty in tomorrow’s Autumn Statement, as revenues have fallen since the rates were increased for the largest property transactions this time last year.
Pensions Tax Relief
The government is currently reviewing the various tax breaks on offer to high earners’ pension contributions. Osborne has indicated that we shouldn’t expect a decision until March’s official Budget, however the likelihood is that higher-rate and additional-rate (40% and 45%) taxpayers could soon lose their generous tax perks on pension. We expect to hear something in the interim as the Treasury will want to avoid a ‘get it before it’s gone’ style surge. The options that are allegedly under consideration are: scrapping upfront tax relief so pensions become more like ISAs; introducing a new 33% flat rate of tax relief; and creating a separate, less generous tax system for savers with final salary pensions.
New State Pension
The New State Pension comes in from next April, and confirmation of the full rate was promised for this autumn, so we expect to hear this announced later today. The minimum rate it can be set at is £151.25, but this doesn’t take into account inflation, so many are hoping for an increase in line with earnings, to around £155.
Help to Buy ISA
As we mentioned in our previous post, the new ISA will launch on December 1st and many providers have already been revealed. We could hear more details about banks and building societies who will also be offering the savings accounts, and when their products will become available.
Tax avoidance crackdown
It is likely that new measures for tackling the tax avoidance issue will be announced, as Osborne tries desperately to claw back some money for the Treasury. It is unlikely now that the government will achieve its target for cutting costs and reducing the deficit in 2015, and cracking down on tax avoiders is one of the more publicly acceptable steps for the Chancellor to take.
Northern Powerhouse & Devolution
We expect the Chancellor to announce plans to devolve more powers to local governments in major cities. Under the city deal scheme, areas – known as ‘city regions’ – are given greater independence from Whitehall and more control over their own finances. It started with Greater Manchester and Liverpool, and now more Northern cities could be joining the bandwagon – including Sheffield and Leeds.
If you liked this article, you may also like: