Chancellor Jeremy Hunt will today be working on the final contents of his much-awaited Autumn Statement, which is likely to be his last before the next general election.
The Government is going into the statement with considerably more headroom due to inflation falling to 4.6 per cent and higher tax receipts than in the Spring Budget.
Mr Hunt told Sky News on Sunday that “everything is on the table” when asked about the possibility of tax cuts. The final details of his plans will not be revealed until 22 November.
Here are the key decisions facing the Chancellor:
Income tax and national insurance
Mr Hunt, alongside Rishi Sunak, is reportedly considering cutting income tax and national insurance.
It has been suggested that income tax thresholds, which were set to remain frozen until 2028, could be adjusted to boost people’s income.
The Times reports that multiple sources have suggested that the higher-rate income tax threshold, when people begin paying the 40 per cent rate, could be raised from its current level of £50,271.
Mr Sunak, when he was chancellor, previously pledged to cut 1p off the basic rate of income tax, which is currently 20 per cent. During his Conservative leadership campaign, he pledged to bring it down to 16 per cent by 2029.
Inheritance tax
Mr Hunt is under considerable pressure from some backbench MPs to cut inheritance tax, which is charged at 40 per cent on an estate’s value above £325,000, or £500,000 if it is passed to a direct descendant.
It is paid by very few people, applying to just 4 per cent of deaths between 2020 and 2021.
There has been widespread speculation that the Chancellor could cut the rate paid above the threshold. Though he may be tempted to hold off until his Spring Budget.
It comes amid concerns that offering a tax cut that only affects the wealthiest in society could be damaging for the Government at a time when high inflation is hitting so many households.
Universal credit
The Chancellor is reportedly considering cutting how much benefits are uplifted by next year in a bid to make room for tax cuts.
In recent years, the Government has calculated the annual universal credit increase in April by using the measure of inflation from the previous September.
But in light of the substantial fall in inflation in recent months, minsters are considering whether to pin the uprating to figures from October, which would knock around 2 per cent off the uprating.
This would equate to between £6 and £8 month less for single claimants and between £9 and £12 less a month for couples.
Campaigners warned such a decision would be a mistake when families are still struggling with the cost of living.
Housing support
The Government is said to be weighing up whether to boost housing support for benefit claimants to help low-income families with rising living costs.
i understands Levelling up Secretary Michael Gove and Work and Pensions Secretary Mel Stride both wrote to the Chancellor urging him to look at unfreezing Local Housing Allowance.
The rate, which supports people on housing benefits or universal credit in the private rental sector, has been frozen in cash terms since 2020 while rents have been soaring.
State pension
i has revealed that Mr Hunt is considering whether to tweak the “triple lock” to cut the cost of the state pension for next year.
New inflation data published last week suggests the pension should rise by 8.5 per cent in 2024.
The triple lock ensures pensions increase by whichever is the highest of average earnings, inflation or 2.5 per cent each year.
Inflation in September was 6.6 per cent but the average earnings increase for May to July was 8.5 per cent, meaning the latter figure will be used.
However, as the earnings figure was distorted by a surge in bonus payments for public-sector workers – agreed by the Government to bring NHS and other strikes to an end – the Chancellor could choose to strip out the effect. This would leave a figure of 7.8 per cent for the triple lock.
Business tax
Many business groups are calling on the Chancellor to extend the 75 per cent business rates relief discount for retail, hospitality and leisure firms. It is set to expire in 2024.
With costs rising due to high inflation, sectors are warning that many premises could see their costs quadruple.
There are also calls from UKHospitality for business rates to be frozen, with claims that the planned inflation-linked rise in April could cost businesses an additional £234m.
There have been reports that the Chancellor is considering extending the “full expensing” policy for businesses.
Announced in the Spring Budget, it allowed companies to offset 100 per cent of the money they spend on new machinery and equipment against their profits.
This policy was due to expire at the end of the 2025 tax year, but Mr Hunt could extend it or make it permanent.
First-time buyer support
One option in the mix to support first-time buyers is extending the mortgage guarantee scheme which helps them get a loan with a 5 per cent deposit.
The scheme was set to end in December 2023 but it could be extended for another year.
There are also calls for the Government to reform its Lifetime Isa (Lisa), which gives first-time buyers a boost to their savings when buying their first property.
Under the current scheme launched in 2017, savers get a 25 per cent government boost when they use their Lisa funds to buy a home, but they are not allowed to use them to buy property over £450,000.
With house prices steadily rising, one option could be to increase the maximum property purchase price.
Stamp duty
Cuts to stamp duty are being considered as “options”, according to Treasury insiders.
This move would stimulate the housing market, which has slowed considerably in the wake of the pandemic.
The point at which people start paying stamp duty is currently set at 5 per cent of the value of a property over £250,000, increasing to 10 per cent for homes over £925,000.
However, there are concerns that slashing stamp duty could fuel inflation, possibly delaying the decision until the Spring Budget.
Personal savings
There have been calls on the Government to unfreeze the personal savings allowance, which allows people to save £20,000 in Isas without paying any tax.
The Chancellor is reported to be considering merging cash and stocks and shares Isas, as well as introducing a new Isa for UK investments in a bid to encourage more business.
But there are concerns that upping the Isa caps could make an already complicated system more confusing.
If the cap was raised by £10,000, it could mean capital gains savings of £35,490 over 20 years for a higher rate taxpayer investing in stocks and shares.
Council tax
One measure being considered by Mr Hunt is reportedly allowing cash-strapped local authorities to increase their council tax rates by around 5 per cent from April next year.
This could mean the average family pays around £120 more each year and would allow councils to charge over £2,000 a year for Band D homes from 2024.
