Budget cuts and tax rises: five predictions for the Autumn Statement

The £12,570 threshold where you start paying 20p income tax and 12p National Insurance is already being frozen for four years until April 2026. Many now expect a freeze on income tax thresholds to be extended for another two years until 2027/28, meaning, for example, those earning more than £50,000 a year could end up paying £3,659 more in tax overall.

The same thinking is behind a predicted freeze on the inheritance tax threshold, which Bloomberg reported the chancellor was interested in introducing. “Preventing the threshold from rising in line with inflation would mean more estates are pulled above it,” said Politico’s London Playbook.

Ending the pensions ‘triple lock’

The pensions “triple lock” was brought in by George Osborne a decade ago and commits to raise pension payments in line with inflation, average earnings or by 2.5% each year, whichever is higher.

Yet with inflation standing at a staggering 10%, the additional cost to the Treasury will be enormous. Raising pensions only by average earnings of 5.5% rather than inflation, will save around £4.5bn a year, according to the Institute for Fiscal Studies, but would deprive people on a state pension of £442 a year.

With Tory MPs and tabloids warning the government could face a negative reaction from voters if they go back on a key manifesto pledge to keep the triple lock there will be “a genuine tussle between politics and ensuring the public finances remain on a sustainable footing”, warned Tom Selby, head of retirement policy at AJ Bell.

According to the Daily Mail, ministers are considering scrapping the triple lock altogether after 2025 and replacing it with a different formula, something Sunak has not ruled out.

Hunt is also expected to freeze the pensions lifetime allowance for another two years to 2027/28 at its current rate of £1,073,100. The Telegraph has reported the chancellor is in talks about halving pension reliefs for millions of higher-rate taxpayers.

Benefits freeze

Like the pensions triple lock there is further speculation the government could look to raise benefits in line with wages rather than inflation.

According to the i news site, experts have calculated that the policy shift “would amount to a cut of four percentage points and cost the average low-income working family with two children more than £1,000 a year”.

It would save the Treasury an estimated £5bn a year. However, the move would be politically dangerous, especially at a time when people are struggling to pay their bills amid a cost-of-living crisis that will disproportionately affect those on benefits and low income.

Article source: https://www.theweek.co.uk/business/economy/958430/budget-cuts-and-tax-rises-five-predictions-for-the-autumn-statement