Big week for personal finances ahead

Both inflation figures and the Autumn Statement are due as the nation’s financial resilience is under threat.

• Inflation figures out Wednesday 16 November, expected to reveal inflation etched higher in October due to heightened price cap on energy bills
• Autumn Statement, on Thursday 17 November, set to reveal a host of tax rises and spending cuts.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “It is shaping up to be a significant week for personal finances, with a number of key announcements due that are set to impact wealth and benefits over the coming years.

“We could see the last ‘inflation hits new 40-year high’ headline for some time on Wednesday when the latest CPI figure is due to be published. Inflation is expected to have peaked in October after energy bills rose by a further 27% on average under the new heightened household energy tariff cap. Inflation is then expected to ease back as the price of energy won’t continue to rise so quickly following the introduction of the energy price guarantee scheme freezing energy bills at £2,500 per year for the typical household until April. The loosening of post-pandemic supply bottlenecks and the rise in borrowing costs curtailing consumer demand (in theory) are also set to having a cooling effect on red-hot inflation.

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“However, the Bank of England doesn’t anticipate a sharp fall in inflation until the middle of next year, which means the cost-of-living stranglehold on household budgets looks set to remain for some time. Keeping on top of rising prices will remain a challenge for many households as astronomical price gains in everyday essentials such as food and household energy are significant contributors to headline CPI.

“The Autumn Statement could hold more gloomy news for Britons, with the chancellor confirming over the weekend that everyone will have to pay more tax and it has become abundantly clear that the extension of the freezing of various tax-free thresholds will help get more tax pounds into the Treasury’s coffers. Pensions savers and pensioners could bear the brunt of austerity measures. A move against pension tax relief or the annual contribution limit could be on the cards, while changes could be made to the pensions lifetime allowance and the tax treatment of pension pots invested in income drawdown plans. And there remains question marks over the pensions triple lock promise – will it be maintained? All this uncertainty does little to instil confidence in the UK’s pensions system, which has been kicked about like a political football.

“Meanwhile, landlords could be rocked by mooted changes to capital gains tax. The tax could be cut or aligned with income tax, which would mean higher tax bills for those when those with additional properties sell. Landlords have already been hit hard in recent years with changes to rules around mortgage interest, stamp duty and wear and tear allowance. A further squeeze on landlords could place upwards pressure on rents.

“The latest house price index by Rightmove adds to growing evidence that the wheels have come off the runaway house prices, with the surge in mortgage rates and ongoing cost-of-living pressures pricing many out of the property market. It will be interesting to see whether existing stamp duty introduced in the ill-fated mini-budget will be maintained to encourage buyers and stimulate the housing market.

“The nation’s financial resilience is under threat, and it is becoming increasingly clear that tough times lie ahead for many.”