Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

The government will announce its latest tax and spending plans at the Autumn Statement next week with several changes to the rules governing our finances on the cards. 

Chancellor Jeremy Hunt may be hemmed in by a tough economic backdrop with little room for giveaways - but that hasn’t stopped the usual pre-statement rumour mill cranking up. 

Here we run through the most eye-catching changes the Chancellor could make on Wednesday and rate the likelihood of each happening. 

A cut to IHT 

There’s always one rumour that jumps to prominence ahead of a financial statement and this time it concerns Inheritance Tax (IHT). Currently, estates worth more than £325,000 are potentially exposed to 40% IHT, although there is an extra £175,000 of allowance if a primary home is being passed on. Spouses and civil partners can pass on unused allowance to each when they die. 

Reports suggest the 40% rate could fall, perhaps to 30% or even 20%. Alternatively, other elements could be tweaked to make the tax a bit more generous or - whisper it - the Chancellor could do away with IHT altogether. 

Such changes would have the advantage of being popular with voters but not necessarily that costly to the exchequer. IHT brings in around £7bn a year for the government compared to around £18bn from Capital Gains Tax, for example. 

Importantly, the Treasury may decide it can make the change without adding to inflation - something which otherwise makes tax-cutting difficult. 

Likelihood: 7/10

A Great British ISA 

There are various rumours concerning ISAs and the most eye-catching is that the government could grant an extra tax-free allowance for investments in British assets. The intention would be to bolster the corporate environment for companies raising money in the UK, while further encouraging saving and investing among Britons. 

Such a change would be very welcome for those currently maxing out their tax-free investing allowances but would be of little consequence to most people for whom the current £20,000 ISA allowance is ample. 

Likelihood: 3/10

More flexible ISAs 

Perhaps more likely are changes to ISAs to make them more flexible in various ways. One would be to allow the free movement of funds between cash and investments within one, single ISA. This would remove the requirement to open separate ISA accounts, potentially with different providers, if you want both cash and investment ISAs.  

Another change being reported is to allow multiple ISAs of the same type with different providers in the same tax year. 

Such changes would not expand what can already be saved overall, or where, but it may reduce friction that can deter some from taking the step to invest. 

Likelihood: 6/10

Fractional shares inside ISAs 

‘Fractional’ shares are when individual company shares are divided up into chunks worth less than one single share. Some share brokerages will divide shares in this way to create fractional shares that can be bought and sold for lower values. 

The potential benefit to investors is that they get to buy smaller stakes in companies if buying a whole share might be too much. Some share trading providers have offered to include fractional shares inside ISAs, but this has faced challenges from regulators.  

The Autumn Statement could be an opportunity for the government to clarify the rules and allow fractional shares within ISAs. 

Likelihood 5/10

A lower State Pension rise 

The Triple Lock ensures the State Pension rises each year by whichever is highest of wage rises, inflation or 2.5%. Readings from the previous September are used to raise the payment in the following April. This time, it is the wage figure that is highest - suggesting an 8.5% rise in State Pensions from April. 

Inflation is now at 4.6% and falling, meaning the rise pensioners get could be twice the rate of inflation and exceedingly expensive for the government. 

There is, then, a big incentive to apply a lower rise - perhaps the 6.7% that inflation rose by in September. This would repeat the suspension of the Triple Lock that happened after the pandemic, albeit for different reasons. 

Attractive as that is to a Chancellor looking to save money it would outrage many pensioners, most of whom are struggling on incomes way below those of their counterparts in other countries. 

Likelihood: 2/10

A hike to the National Living Wage  

The National Living Wage is the lowest amount workers aged 23 and over can be paid per hour by law, and is currently £10.42 an hour. 

The Chancellor has already indicated his ambition to raise the benchmark to £11 an hour by next year - a rise of around 5.6%. The cost will fall on employers and will be attractive to the Chancellor as he tries to further ease the cost-of-living crisis. 

Likelihood: 9/10

A Stamp Duty holiday 

Boosting the housing market has long been a favourite tactic of chancellors looking to perk up the economy, as well as the mood of Briton’s property owners. So rumours of a Stamp Duty cut are no surprise as the government struggles to raise its poll numbers. 

But in contrast with the past, rising house prices are no longer seen as a straightforwardly good thing. Home ownership is falling and it is concerning many people beyond young renters locked out of the market. 

Likelihood: 4/10

An Income Tax cut 

Better news on tax receipts and borrowing has raised expectations that Jeremy Hunt could cut income taxes. Taxpayers have been squeezed in previous financial statements by extended freezes of the thresholds for basic, higher and additional rate tax which have the effect of dragging more workers into higher tax bands as their pay rises.  

Thresholds have been frozen at their current levels until 2028, meaning substantially more will be taken from wages in the years ahead. 

Any cut which leaves workers better off now - including cuts to headline rates for tax - are unlikely given the need to avoid measures which are inflationary - but the length of freezes to thresholds could be candidates if the Chancellor is eager to offer some light at the end of the tunnel. 

Likelihood: 4/10

Improving the LISA 

Lifetime Isas (LISAs) allow anyone aged 18 to 40 to save up to £4,000 each year with a bonus of 25% of whatever is saved added by the government. Contributions can be made until age 50. The money can be withdrawn and used for the purchase of a first home worth up to £450,000, or else after age 60. If money is withdrawn outside those circumstances a 25% charge is applied.   

Campaigners have been calling for the penalty to be reduced so that those unable to buy a home for less than £450,000 do not face losing part of their savings if they fall foul of the rules. This change, as well as an annual uprating of the £450,000 limit, could be on the cards. 

Likelihood: 6/10

Another freeze in fuel duty 

The rate of tax on motor fuel is supposed to rise annually but successive government have given in to calls to keep the rate frozen, and the rate was actually cut by 5p per litre in 2022. The rate is currently 52.95p per litre. 

That’s an irritation to environmental campaigners but any rise in the rate will attract the ire of drivers - a key group that the government says it wants to support. Another freeze looks imminent. 

Likelihood: 8/10 

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. 

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