Global menu

Our global pages

Close

Predictions for the UK Autumn Statement

  • United Kingdom
  • Banking and finance
  • Pensions
  • Tax planning and consultancy
  • Tax planning and consultancy - Autumn Statement
  • Energy and infrastructure

14-11-2022

Following a chaotic couple of months in the world of UK tax, the new Chancellor’s highly anticipated Autumn Statement will take place on Thursday 17 November. With inflation at a 40-year high, interest rates soaring and the Bank of England anticipating the UK’s longest recession since records began, the UK is looking to its new Chancellor to navigate a sensible path through stormy economic waters.

We consider some of the key tax changes the Chancellor may make alongside spending cuts, as he attempts to reduce the so-called “black hole” in the public finances.

Energy profits levy

Oil and gas companies are a clear target for windfall taxes, given the significant profits they have been recording as a consequence of the war in Ukraine pushing up energy prices. Reports suggest the energy profits levy announced in May 2022 may be increased from 25% to 30% or more and extended until 2028, and that its scope may be expanded to encompass electricity generators.

Banking taxation

The banking sector is a possible target for increased taxation, a potentially popularist move at a time when banks are benefiting from significant interest rate rises. However, reports have indicated the prime minister intends to continue with plans to cut the banking surcharge from 8% to 3% when corporation tax rises to 25% in April 2023. This is welcome news, as the government needs to ensure it doesn’t increase banking taxation to a level which would undermine the UK’s attempts to sustain its reputation and attractiveness as a global leading financial services hub after Brexit.

Stealth taxes

The Chancellor may decide to extend the current freeze on income tax thresholds for a further two years, until 2027-28. (There is also speculation the Chancellor could increase the 45% additional rate of income tax, or significantly lower the threshold for the additional rate.) At a time of rising inflation, a failure to increase the income tax thresholds amounts to a stealth tax on individuals which will generate additional tax revenue but increase pressure on households already facing a cost of living crisis. It also appears the Chancellor may extend a freeze in the nil-rate band for inheritance tax, from 2025-26 to 2027-28.

Capital gains tax

The Chancellor may focus on capital gains tax as an area for potential reform, whether by raising CGT rates to bring them more in line with income tax rates, or by cutting reliefs or allowances such as the annual exemption. As with banking taxation, the government needs to carefully weigh the increased revenue that these changes would bring against the risk of further taxing away future business growth in the UK. With this in mind, the government should consider revisiting the current incentives for encouraging investment in and growth for entrepreneurial businesses.

Dividends tax

Dividends tax may be in the Chancellor’s sights. It is possible that rates of dividend income tax may be increased (perhaps to align them more closely with income tax rates) and the £2,000 dividend allowance may be abolished or reduced.

Pensions tax

The controversy over whether the government will retain the pensions triple lock has been well-publicised. The Chancellor may be considering some tax changes in the area of pensions, such as an extension of the current pensions lifetime allowance (another stealth tax), or a reduction in pensions tax relief for higher rate taxpayers.

Tax reliefs

In an Autumn Statement that will be heavily focused on tax increases to prop up the UK’s finances, it is unlikely there will be any generous tax giveaways.

Following the Chancellor’s emergency statement on 17 October 2022, it appears the welcome extensions to the Company Share Option Plan regime and the Seed Enterprise Investment Scheme, which were announced in Kwasi Kwarteng’s now notorious mini-budget, may remain in place.

Mr Kwarteng’s plan for Investment Zones, which would benefit from tax incentives and planning liberalisation, was not addressed in Mr Hunt’s emergency statement. However, it is likely the scope of the related tax reliefs will be significantly reduced if the government decides to continue with these proposals.

Conclusion

The Autumn Statement represents a difficult balancing act for the Chancellor. He needs to weigh the desire to increase taxes to mitigate the nation’s fiscal black hole against the dangers of discouraging investment and business growth in the UK, particularly in a post-Brexit world. The government must also avoid squeezing individuals and businesses too hard on taxes, given the current harsh economic conditions.

How Eversheds Sutherland can help

We are active in every area of taxation, from structuring complex transactions and designing insurance and financial products to advising domestic and cross-border business operations, and understand your business. If you would like to discuss the impact the Autumn Statement will have on your business, or how we can help you in relation to any other tax matters, please do not hesitate to get in touch with one of the Eversheds Sutherland contacts listed below.