Ahead of the budget next Wednesday, this post will round up speculation about potential announcements, as well as what various industry bodies are demanding of Chancellor Jeremy Hunt…
Tax cuts
Mr Hunt is under pressure to cut taxes from Tory MPs and has previously hinted he is keeping the move up his sleeve as a pre-election giveaway.
However, the chancellor recently cast doubt over whether he would have the capacity to do this by March, given the high costs of servicing government debt and the UK entering recession.
Economists at Pantheon Macroeconomics think he will have £25bn to play with.
George Osborne, the former chancellor, has said on his podcast – Political Currency – that Rishi Sunak and Jeremy Hunt are arguing over whether to cut income tax.
Number 10 would like to make a reduction, but the Office for Budget Responsibility considers such a move inflationary, he added.
National Insurance cut
Mr Hunt could decide to cut national insurance again by 1p, at a cheaper cost of around £5bn.
According to The Times, this is something the chancellor is mulling over after shelving a 2p cut to income tax because of its unaffordability.
Stealing Labour policy on ‘nom-doms’
The chancellor is considering scraping tax breaks enjoyed by Britons’ whose home is overseas for tax purposes, Sky News understands.
Changing the non-domicile tax status, which means “non-doms” don’t have to pay tax on money made outside the UK, was a Labour pledge previously criticised by Jeremy Hunt.
There are approximately 68,800 non-doms in the UK according to the latest figures from HMRC, calculated in the tax year ending 2022.
The prime minister’s wife, Akshata Murty, previously benefited from the status, before committing to paying UK tax on overseas income two years ago.
Vape duty
The same report said Mr Hunt is considering a “vaping products levy” which would be paid on imports and by manufacturers of vapes in an attempt to make the habit unaffordable for children.
Downing Street confirmed to Sky News the levy is being considered “as an option”.
Help for first-time buyers
Away from tax cuts, Mr Hunt was said to be drawing up proposals for a 99% mortgage scheme ahead of the budget.
It would have allowed first-time buyers to put down a 1% deposit, with the government acting as a loan backer, according to the Financial Times.
Now, though, it’s been scrapped, according to The Telegraph.
There has reportedly been a backlash from lenders who warned there could be a surge in defaults among borrowers.
Estate agent Rightmove has called for the government to implement three policy changes – and continue with something that’s due to fall away – in the budget to help people move home.
“At the very least, the government should be thinking about making the current changes to first-time buyer stamp duty charges permanent, with the higher thresholds introduced in 2022 due to expire next year,” Tim Bannister, Rightmove’s property expert, said.
It has also suggested a more localised approach to stamp duty charges, the creation of a mortgage scheme that supports first-time buyers and more incentives for landlords to create greener homes for their tenants.
Car insurance, EVs and fuel duty
The UK car industry is pleading with the chancellor to help reinvigorate the transition to electric vehicles (EVs).
The Society of Motor Manufacturers and Traders is calling for VAT on a new EV to be cut from 20% to 10%.
The AA, meanwhile, has submitted a list of requests to the chancellor:
- Maintain the fuel duty freeze. It has been frozen since 2011, but it is due to go up by 5p at the end of March;
- For greener vehicles, drop VAT for on-street EV charging from 20% to 5%;
- Keep vehicle excise duty lower than petrol and diesel cars once that duty is introduced to EVs after 2025;
- Cut insurance premium tax (IPT) by 25% – this tax on insurers is passed on to motorists, adding £67 to an average premium, according to the Association of British Insurers.
Hospitality
Hospitality industry bodies have demanded action as firms continue to struggle. They want VAT on food and drink to be cut from the current 20%, as it was during the pandemic.
Inheritance tax abolished
There has been rampant speculation that Mr Hunt could abolish inheritance tax, but given it raises around £7bn for public services a year and just 4% of the population pays it, scrapping it would be a huge electoral gamble.
Overhaul of lifetime ISA rules
Mr Hunt has hinted he is open to shaking up Lifetime Individual Savings Account (LISA) rules as another way to get more people on the property ladder.
LISAs offer a government-funded bonus on savings for buying a first home, but penalty charges apply if the cash saved is not spent on property, or if the property purchased is above the current £450,000 limit.
Money-saving expert Martin Lewis has called for that limit to be increased to take into account rising house prices, and for penalty charges to be reduced in order to make the scheme a more attractive savings vehicle.
Child benefit reform
Mr Hunt may also use the budget to raise the threshold at which the controversial high income child benefit charge applies.
Currently anyone claiming child benefit has to pay some of it back if they earn over £50,000 or all of it back once they start earning £60,000 a year. It is seen as particularly punitive to single-income families as one parent earning £50,000 would face the charge, but two parents earning £49,000 each would escape it.
According to the Resolution Foundation, raising the withdrawal threshold from £50,000 to £70,000 would cost £2bn and abolishing it altogether would cost £4bn.
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