The Chancellor of the Exchequer will deliver his Autumn Statement on Wednesday 3 December. This will provide an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility, which will be published the same day.
The focus of the Autumn Statement is primarily economic; it is not one of the major events of the tax year, like the Pre-Budget Report which the previous government presented at the same time of the year, until 2009. Significant policy announcements in the tax area are now largely confined to the Budget, which takes place in March. However, the Chancellor’s speech on 3 December, and the accompanying documents, may well mention some tax matters, though probably not in great depth.
Of more interest than the Autumn Statement, as regards tax, are the events of the following week, when on Wednesday 10 December the government will publish in draft much of the legislation that will form the 2015 Finance Bill in the spring of next year. Most of this relates to policy announcements made in the Budget in March 2014, and on which the government has been consulting extensively since then.
Key tax items on which we expect more information on 10 December are:
- the extension of capital gains tax to gains made by non-residents disposing of UK residential property;
- restrictions to income tax personal allowances for non-residents;
- simplification of the taxation of employee benefits;
- rules to allow HMRC to recover tax and tax credit debts of £1,000 or more directly from; taxpayer bank accounts;
- increased civil penalties, and a new criminal penalty, for understatement or non-disclosure of income arising overseas.
For a more detailed list of possible changes, click here
Of course, there could always be surprises. While making significant tax announcements at the time of the Autumn Statement is a departure from the general pattern the government has set itself, experience suggests that it is unlikely to resist the temptation entirely.
This is the last Autumn Statement before the General Election that is due to take place on 7 May 2015. If the Chancellor has tax changes in mind that he believes will convince voters of the success of his economic policies over the last parliament, or will encourage them to vote Conservative , he may well see this as an appropriate time to say so. On the other hand, he may wish to keep something in reserve for the Budget in March 2015.
In his speech at the Conservative Party Conference in October, the Prime Minister undertook to increase the personal allowance from to £12,500, and the threshold for the 40% rate of income tax to £50,000, by 2020. The increases sound significant, but they would be achieved in any case under current legislation if annual inflation averaged fractionally over 3.5% in the period. The Chancellor might therefore wish to commit to real-terms increases, or to bring forward the timescale for implementation.
In the longer term, some smoothing of the sharp rise from the 20% basic rate to the 40% higher rate would give a more rational structure to the income tax system and would doubtless be welcomed by middle-income taxpayers. So, also, would the removal of the effective 60% rate that applies to income between £100,000 and £120,000, as a result of the gradual withdrawal of the personal allowance between those limits. Even if the Chancellor is sympathetic to such moves, however, they may be politically unacceptable in the run-up to the election.
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