Income tax
One of the Conservatives’ pre-election pledges was an increase in the threshold for the higher rate of income tax towards £50,000 by the end of the parliament, and a rise in the tax-free personal allowance to £12,500. Despite stringent criticism over the funding for these measures (including cutting support for the disabled), George Osborne could raise both faster than anticipated. Fuel DutyAh, this old chestnut. Unsurprisingly, motorists are vehemently opposed to any hikes in fuel duty – which has been frozen since 2011 – not least because fuel duty in the UK is among the highest in the world. But the low oil price might be the perfect opportunity to instigate an increase. According to the RAC, a rise in line with inflation would add 0.75p tax per litre, generating nearly £350 million.
Child Benefit and middle income earners If the child benefit tax threshold is reduced in the Budget, this would affect people earning £43,000. A child benefit tax charge currently kicks in when a parent earns more than £50,000. But NFU Mutual says that the Chancellor may reduce the threshold to bring it into line with higher rate income tax. Sean McCann, chartered financial planner at NFU Mutual, said: ‘We already expect that by 2020, any parent paying 40 per cent income tax and receiving child benefit will likely face a child benefit tax charge.’Pensions
The Chancellor’s U-turn on pensions (he abandoned plans to change tax relief on pensions contributions – one option under consideration had been to replace the tiered system with a flat rate of pension tax relief) came as a blow to low income workers and a boost for middle-class savers. But Osborne could still cut the maximum amount savers can put in a pension each year from its current rate of £40,000. It was last cut from £50,000 in 2014. There is also the possibility that he will reduce the tax-free lump sum from 25 per cent.
Insurance Premium Tax Insurance brokers are urging the Chancellor to step back from any further increase in Insurance Premium Tax. He is believed to be considering hiking up the rate of IPT – after increasing the standard rate from 6 per cent to 9 per cent last November. If it does rise to 12.5 per cent, as some commentators believe it might, it would represent an increase of 108 per cent in six months. Stuart Bennett, director of online business insurance firm Quote Dave, said: ‘This is an increase in tax that SMEs can well do without. If the Chancellor goes ahead with a further increase in his Budget tomorrow, it will represent a classic case of ‘mission creep’.’Help to Save
Low earners look set for a £1,200 boost under a ‘Help to Save’ scheme. Employees on in-work benefits could get a top-up worth 50 per cent of what they put aside, capped at £300 a year for four years. To qualify for the full amount, they have to save £2,400 or £50 a month.
Join The Spectator at the Budget Briefing with Andrew Neil, Fraser Nelson and James Forsyth.
16 March 2016 | The British Museum, Great Russell Street, London WC1B 3DG Book here.
Comments