A tax raising statement, but not for a while

Chris Sanger, EY’s Head of Tax Policy, comments the Chancellor’s Autumn Statement:

“The Chancellor may have avoided pulling rabbits from hats, but this Autumn Statement was certainly intended to make instability disappear. This was very much in keeping with a traditional role of an economic statement, setting out the future direction rather than revealing mass changes that take immediate effect. Indeed, the tax rises, outside of energy, increase significantly towards the end of the forecast period, as thresholds are frozen for the next two years.

“While the £50bn ‘black hole’ in annual public finances remains a significant sum, the measures announced today will begin to plug it, but won’t deliver this full amount per year until 2027/28. However, once put into the context of the UK’s total tax receipts exceeding £1 trillion by 2025/6, it is clear why the Chancellor didn’t feel the need to act too swiftly. The extensions to threshold freezes announced today are intended to avoid exacerbating the effects of a recession in the short term but will start to contribute to greater tax receipts for the Exchequer, particularly once inflation causes pay to rise.

“On the business side, there was comparatively little other than on energy, beyond confirmation that the UK would remain committed to the changes to international tax being discussed at the global level.  One area of action was in the changes to tax support for Research and Development, where the Chancellor differed from his predecessors and shifted support from small to big business.  Those hoping for broader investment support will have to wait until the Chancellor next takes to the dispatch box.  The government will be hoping that the stability of the economy is enough to maintain the attractiveness of the UK, despite the rise in corporation tax. 

“Much of what we saw today was a seamless extension of the policy framework of Rishi Sunak’s time as Chancellor, with the current Chancellor even referring to the Mais Lecture in which the now-PM set out his economic vision.  Businesses will hope that the incentives for investment that were part of that approach will still come to pass, perhaps in the Spring.”