Back To The Future - and a look ahead

Disconcerting time travel this week as David Cameron is back, Lady Di returns to our screens in The Crown and inflation is under 5%. This is not very 2023-y is it? Next thing we know, Take That will be Number One and I’ll be a Size 10. [Pause for hysterical mirth].

As the Government reels under various blows, ministers have taken comfort from the headlines about falling inflation. But I always furrow my brow and make a churlish face when I hear them banging on about this. Grumpy Gordon Brown made the independent Bank of England responsible for interest rates back in 1997. And it is higher interest rates and falling energy prices which have largely led to falling inflation, not the Government. So Rishi’s high fives about lower inflation is a bit like the CEO of EDF Energy taking all the praise for the Oxford Street Christmas lights.

Next week is the Autumn Statement from the Chancellor, who is likely to remain irritatingly responsible from the perspective of some of his beleaguered colleagues who would like some shiny prizes to be thrown around. Here’s what is rumoured to be under the spotlight:

Will he cut tax thresholds?

The Government has committed to freezing these until 2027-2028. This impacts us significantly. One in six adults is likely to become a higher rate taxpayer in 4 years’ time if this stays in place. Cutting them would be a crowd pleaser but not one which is widely expected now – maybe in the Spring?

Multiple ISAs?

The rules around ISAs are pretty confusing. The basic gist is that every adult gets a total of up to £20,000 a year which they can shield from tax in various different types of ISA. You can open more than one TYPE of ISA every tax year (for example, have one Cash one and one Stocks & Shares one), but you can’t pay into more than one of the same type of ISA in the same tax year (for example, a Stocks & Shares ISA with Hargreaves Lansdown AND interactive investor). There’s a rumour he might allow us to use multiple ISAs of the same type in any one year. This would make life a lot simpler for everyone and remove the potential for accidental mistakes.

Lifetime ISAs

There is an opportunity to simplify these. Available to open to all under 40, they support those saving for a first property and see up to £1,000 a year of free top-ups from the Government for every £4,000 paid in, for example. But they are pretty confusing. The £4,000 maximum annual contribution is included in our overall annual £20,000 ISA allowance – it’s not separate. Which muddies the waters. And they have nasty exit penalties if you change your mind about buying a property or need access to the money.

Despite this, if you’re dead set on buying a property and in saving mode – do read up on them as it’s money for jam. With strings.

Inheritance Tax

The Office for Budget Responsibility has said that ‘fiscal headroom’ (the ability to be less hardcore on how much you raise from tax) has grown. So could Jezza have a very small bunny in his hat after all? If he does give any tax cuts, it’s more likely to be around Inheritance Tax or Stamp Duty, because these have less of an impact on inflation than doing anything with Income Tax which puts more money in all our pockets.

Booze

And in final crushing news, alcohol duty is expected to go up yet again in line with inflation. Boo hiss. Why don’t you just tax shoes and chocolate and really spoil my fun?

A last little note for those readers who like to invest for an income. In other words, to invest in funds or companies which are typically well-established, traditional and profitable, so cash-rich and able to share some of the spoils with their shareholders. Making regular cash payments throughout the year – aka dividends. This week’s sponsor – The Murray Income Trust – is 100 years old, and this year is the 50th year in which it has grown its dividend. It started life as the rather brilliantly self-effacingly named ‘Second Scottish Western Investment Company’, with an initial share capital of £500,000. Which is over £1 billion Big Ones today.

Over and out from me. I’ll leave you with a little prediction about the future. Based on the past. One day in July next year, the weekend papers will carry a picture of Vilebrequin-wearing David Cameron chillaxing on a Cornish beach in a ChippingNortonny way with Sam Cam. And it’s going to make me feel irritable!

Have a good weekend everyone!

Holly

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