As the cost of living crisis continues, predictions suggest the chancellor is expected to focus on alleviating the pain for the most vulnerable in the spring statement tomorrow (March 23).
In 2017, chancellor Phillip Hammond moved the Budget from the spring to the autumn to give time for announced taxation changes to be put into law and absorbed by accountants and the tax authorities before the end of the tax year.
Unlike the Autumn Budget, the spring statement is only meant to be an economic update, introducing broad policy changes and smaller spending pledges, as well as present the latest data and forecasts on the economy and public finances.
However, many have high hopes set for what the chancellor could do in the statement this time round.
Laura Suter, head of personal finance at AJ Bell said the government has already announced some handouts, but that was before the Ukraine crisis pushed energy costs even higher.
“At a time when some households are having to make tricky decisions between paying for heating or food, it looks particularly poorly timed for the government to be launching a new tax hike, in the form of a rise to National Insurance, or freezing income tax rates and so taking more out of people’s pay packets by stealth,” she said.
“At the same time, hospitality businesses will see an increase to their VAT back to 20 per cent after the emergency lower rate during the pandemic and many businesses will face rising staff costs thanks to a minimum wage increase.”
So what changes could be in his sights to help the UK public?
Industry commentators have argued that while we are likely to see some aid from Sunak in the statement tomorrow, there could possibly be some tax hikes to make that money back.
In his April 2021 Budget, Sunak introduced a raft of freezes to tax allowances and thresholds rather than increasing these in line with inflation. This included income tax thresholds and bands as well as wealth tax exemptions and the pensions lifetime allowance.
Steven Cameron, pensions director at Aegon, said: “While in the past such ‘stealth tax’ measures have often gone unnoticed, in the current climate of rampant inflation, they will have a major adverse impact on an increasing number of people. For example, many more people will become higher rate taxpayers.
“The chancellor could not have foreseen the events which have led to inflation rising sharply and may wish to revisit this approach in his spring statement, perhaps by increasing allowances or committing to end the freeze before the planned five-year term.”
However, in order to raise this capital, some tax hikes could be likely. Suter said increasing ‘wealth taxes’ could be a popular move.
“Capital gains tax generated £10.6bn last year, and this is rising as property and investment prices climb. There has previously been speculation that the current capital gains tax rates of 10 per cent and 20 per cent (or 18 per cent and 28 per cent for property) will be scrapped and instead everyone will pay income tax rates on their gains.