Chancellor Jeremy Hunt could make changes to stamp duty, Isas, income tax and national insurance in the Budget this week (March 6), despite some not expecting it to have a "seismic shift' on the economy.
As with the run-up to any Budget, there have been predictions swirling as to what changes Hunt could make.
Income tax cuts seem likely, as to do changes to the Isa regime, particularly the Lifetime Isa. Whereas, it is expected to be a pretty quiet Budget on the pensions front.
So, what can advisers expect from the chancellor tomorrow?
Income tax
Income tax cuts could be delivered by increasing the personal allowance and/or basic rate tax band, or by reducing the basic rate.
Alternatively, the chancellor could follow his Autumn Statement approach and cut National Insurance contributions (NICs) rates further.
The personal allowance and higher rate threshold have been frozen at £12,570 and £50,270 since April 2021.
RSM explained with inflationary increases they would now exceed £15,000 and £60,000 respectively.
RSM said: "A personal allowance increase would be most beneficial to those with lower incomes, reducing the amount on which tax is payable whilst providing no benefit to the highest earners who have no such entitlement.
"Comparatively, a reduced basic rate or increased basic rate band would provide greater benefit to higher earners, with increases to income tax thresholds likely mirrored in NICs thresholds, which have been aligned since April 2022."
Evelyn Partners financial planning partner, Gary Smith, said a cut to national insurance would"be welcome to workers who would see another rise in disposable income”.
Smith explained that a 1p cut would amount to an extra £74 a year for someone on £20,000, £274 for someone on £40,000, and £377 for higher and additional rate taxpayers.
Lifetime ISA
While there were some changes to the Isa regime in the Autumn Statement, industry spokespeople expected more changes to Isas to come in the Budget.
Aegon head of pensions, Kate Smith, said now may be the time for the chancellor to announce a “raft of modernisation changes” to the Lifetime Isa.
She explained that, currently, you can’t open a Lisa if you are older than 40, can only contribute a maximum of £4,000 per year, and can no longer contribute once you hit 50.
To address this, Smith said: “Raising the maximum age for taking out a Lisa, say to 50, will make them available to a wider audience, while allowing contributions to continue, possibly to 55, could enable Lisa savers to build up larger sums.
“The annual contribution limit is also restrictive and might be raised.”
Smith argued these changes would make Lisas “more effective” as a retirement vehicle, particularly for the self-employed who do not have access to workplace pensions with employer contributions.
Additionally, HW Fisher tax partner, Sam Dewes, said: “Lifetime Isas have successfully helped first-time buyers, but it’s time for the chancellor to raise the purchase threshold.
