From tax cuts to pension changes, here's what the chancellor has planned for your money.
Jeremy Hunt, the Chancellor of the Exchequer, will deliver the Spring Budget on 6 March 2024.
It’s likely to be the final fiscal event ahead of the General Election, and so is sure to be particularly noteworthy.
So what’s likely to be included, and what impact will it have on our finances?
Income Tax or National Insurance cut?
It’s not uncommon for Governments to cut taxes ahead of a General Election, to boost their chances with the electorate.
And there are few more popular ways than reducing the level of tax we pay on our incomes, whether in the shape of Income Tax or National Insurance.
The Chancellor reduced National Insurance in the Autumn Statement last year, and there is talk that he may do so once again. An alternative option would be to reduce Income Tax itself, with some newspapers suggesting a couple of pennies could be taken off the levy.
Only time will tell whether the Chancellor feels he has the cash at his disposal to make such a cut, while it’s also debatable what impact it would have given the effects of fiscal drag and frozen thresholds on our tax.
Inheritance Tax
There has been speculation for some time that the Government wants to adapt, or potentially even scrap entirely, Inheritance Tax.
Inheritance Tax is one of the most unpopular of all taxes, and so there has long been support for the idea of reducing it. It was floated as an idea before the Autumn Statement, though Hunt decided against making any changes at that juncture.
However, with a General Election on the horizon, making it less of a concern for families is once again a compelling idea.
It’s worth noting what a big earner it is for the Government, though. With property prices rising so substantially in recent years, greater numbers of estates have been dragged into paying it.
Between April and December last year, the levy brought in £5.7 billion, a jump of £400 million on the same period of the previous year, with the tax expected to bring in a new record high when the financial year finishes.
Check out our guide to paying less Inheritance Tax.
High Income Child Benefit Charge (HICBC)
Another tax believed to be under review is the High Income Child Benefit Charge, which was introduced back in the days of the Coalition Government.
Under the charge, Child Benefit has to start being paid back once one parent earns over £50,000. Once they hit a £60,000 annual income, the entirety of any Child Benefit received needs to be paid back.
The system has always been unfair, since it only accounts for a single income rather than household income.
As a result two parents earning £49,000 each would get to keep all of the Child Benefit, while a household with a single earner receiving £60,000 would have to give it all back.
Hunt himself has admitted there is an unfairness in the system, with speculation mounting that he may take this opportunity to correct it.
Mortgage help
The last few years have been particularly tricky for people looking to get onto the housing ladder.
It’s not just the shortage of housing stock which has helped push prices up further, but the rising interest rates on mortgages have also presented a challenge for aspiring buyers.
We are a nation obsessed with homeownership, which is why whenever the Government turns its attention towards housing it looks for new ways to boost demand and give buyers a helping hand. After all, it’s a quicker fix than actually building more homes.
One mooted option has been the expansion of the mortgage guarantee scheme.
The scheme essentially sees the Government take on the risk for high loan-to-value (LTV) lending, a way of pushing lenders into offering more mortgage deals to those with only a 5% deposit.
However, there is talk that it will be extended to instead boost the chances of lenders offering 99% LTV mortgages, meaning buyers only need to put down a 1% deposit.
Such a move would obviously be popular with those currently struggling to purchase a home, though whether it would actually do any good to the housing market itself is more open to debate.
A pension for life
Back in the Autumn Statement, Hunt announced a consultation into the idea of a ‘lifetime pension’.
The idea is that you pay into a single pot over your lifetime, and it moves with you when you switch jobs.
That’s in stark contrast to the current system, where you can end up with a separate pension with each new job, leaving you at risk of losing touch with some of your pension cash by the time you give up work.
The consultation closed last month, so there’s a decent chance we will get some sort of update on when such a pension change might take effect.
ISA reform
There was a lot of speculation before the Autumn Budget around the potential launch of a ‘British ISA’.
The idea was that we would all get a separate ISA allowance which could be used for investing in British businesses.
Nothing came of it in the end, but don’t be surprised if you see it re-emerge, as a way of drumming up investment for our businesses and offering investors the chance to bag tax-free returns.
The Budget may also see Hunt revamp the Lifetime ISA. It’s another financial area where he has recognised some unfairness, with a massive withdrawal penalty if you take money out for a purpose other than buying a home or for your retirement.
The 25% penalty not only wipes out the bonus payments you get from the Government for saving in the ISA in the first place, but also eats into the money you have saved yourself, making it overly painful.