The Spring Budget will be held on 6 March, and there’s already speculation about tax cuts. Here we explain what chancellor Jeremy Hunt could announce.
The Budget is also the final opportunity for the government to lay out its plans before the next general election, which is rumoured to be held in November.
November’s Autumn Statement already outlined definite changes coming this year: cuts to national insurance, rises to the minimum and living wage, and a triple-lock boost to the state pension. But there’s lots that we don’t know. Here we outline what could be in the chancellor’s red box.
- What is the Spring Budget and how does it affect my money?
- Income tax cuts
- Inheritance tax could be slashed, or even abolished
- Child benefit changes
- Changes to Lifetime ISAs
Have a premium Times subscription? Read what political editor Steven Swinford had to say about the spring budget
What is the Spring Budget and how does it affect my money?
The Spring Budget, or just the Budget, is when the government updates the public on the state of the UK economy, shares projections made by the Office for Budget Responsibility (OBR) and announces its fiscal plans for the year ahead.
Generally, the budget focuses on changes to taxation and spending. For example, last year, the chancellor increased the availability of free childcare and abolished the lifetime pension allowance.
Cuts to income tax
In the Autumn Statement, the chancellor made cuts to national insurance that kicked in at the start of January. According to the Treasury, these changes will save the average pay-as-you-earn (PAYE) worker £450 a year.
According to The Times, the chancellor has more tax cuts in the pipeline. This could either come in the form of a further cut to national insurance or, according to The Telegraph, a 2p off income tax.
A 2p cut to income tax for someone earning £35,000 would leave them £448 better off a year while someone earning £60,000 would have an extra £948, according to analysis from AJ Bell.
Meanwhile, a further percentage point cut to NI would leave a worker earning £35,000 a year £673 better off while someone earning £60,000 would be £1,131 better off.
It sounds good, but such cuts are wiped out by the impact of frozen tax thresholds, known as fiscal drag.
Inheritance tax could be cut, or even abolished
Almost every time the government has delivered a budget in recent years, analysts have speculated about the possibility of changes to inheritance tax (IHT). With an election looming, we could finally see it overhauled or even scrapped.
Currently, you can leave up to £325,000 tax-free to beneficiaries of your estate. Anything over this figure is taxed at 40%. For some voters, this may be an important issue. However, the latest data shows only 4% of estates were subject to IHT.
According to The Telegraph, the government is weighing up whether cuts to IHT or income tax are more important. It also revealed that Conservative MPs currently favour the latter option.
Read more: Seven ways to pay less IHT
Child benefit changes
The chancellor is reported to be considering raising the £50,000 threshold at which claimants begin to lose their child benefit. This would help households that have seen their incomes rise above this threshold due to inflation.
Currently, when a parent receiving child benefit starts earning £50,000 or more, they start to lose some of it. For each £100 that parents receive over this threshold, they must repay 1% of the child benefit they receive. By the time they earn £60,000, all of the child benefit has been withdrawn.
Read more: Tax-free childcare UK: Are you eligible?
Overhaul the Lifetime ISA
The chancellor seems open to making changes to the Lifetime ISA after being challenged on The Martin Lewis Money Show about the unfairness of the penalty that first-time buyers face when buying homes above the £450,000 limit.
If you’re aged between 18 and 39, you can open a Lifetime ISA. These allow you to save up to £4,000 each tax year and receive a 25% bonus up to £1,000 from the government. This can go towards a deposit on a house, as long as the property costs £450,000 or less, or alternatively towards retirement.
However, as house prices have risen by 29% since April 2017, when the Lifetime ISA launched, the government may see fit to increase the maximum property value associated with the account.
Campaigners have called for the withdrawal penalty on a Lifetime ISA – currently, it stands at 25% – to be lowered or completely scrapped. The penalty currently means you’ll actually get back less money than you initially deposited.
A ban on mid-contract broadband rises
Jeremy Hunt may consider banning mid-contract broadband and mobile price hikes.
It would mean customers would no longer be forced to deal with the unpredictability of annual inflation-linked price rises. For example, broadband providers BT, EE, Three, TalkTalk and Vodafone have already confirmed April price rises of approximately 8%.
Clauses in contracts that allow providers to increase their prices by 3% or 4% above inflation have been slammed by campaigner Martin Lewis.
Read more: How to save money on broadband
Increase student maintenance loans
Students will be looking to see if Hunt announces an increase to their maintenance loans, which have not risen in line with inflation since 2020-21, leaving a shortfall of £1,500 a year according to the Russell Group.
Campaigner Martin lewis has highlighted to the chancellor in a letter that students have been disproportionately affected amid the soaring cost of living – the chancellor may take note and adjust the way in which student loan increases are calculated.
Read more: Student finance: what you need to know
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Spring Budget and Its Impact on Personal Finance
The Spring Budget, also known as the Budget, is an important event where the government updates the public on the state of the UK economy, shares projections made by the Office for Budget Responsibility (OBR), and announces its fiscal plans for the year ahead. It primarily focuses on changes to taxation and spending, which can have a direct impact on individuals' finances. The upcoming Spring Budget on 6th March is particularly significant as it is the final opportunity for the government to lay out its plans before the next general election, rumored to be held in November.
Income Tax Cuts: The Chancellor, Jeremy Hunt, is speculated to announce further tax cuts, potentially in the form of a 2p cut to income tax or a further cut to national insurance. These changes could significantly impact the disposable income of individuals, with potential savings of £448 to £948 for those earning £35,000 and £60,000, respectively.
Inheritance Tax Changes: There is speculation about potential cuts or even the abolition of inheritance tax, which could have implications for estate planning and wealth transfer. The government is weighing up the importance of cuts to inheritance tax or income tax, with Conservative MPs currently favoring the latter option .
Child Benefit Adjustments: The Chancellor is considering raising the £50,000 threshold at which claimants begin to lose their child benefit. This potential change could benefit households that have seen their incomes rise above this threshold due to inflation.
Lifetime ISA Overhaul: Changes to the Lifetime ISA are being considered, particularly in response to concerns about the penalty faced by first-time homebuyers when purchasing homes above the £450,000 limit. Campaigners have called for the withdrawal penalty on a Lifetime ISA to be lowered or completely scrapped, considering the rise in house prices since the account's launch.
Other Potential Changes: The Chancellor may also address issues such as banning mid-contract broadband and mobile price hikes, as well as increasing student maintenance loans to address the shortfall caused by the soaring cost of living.
These potential announcements in the Spring Budget could have significant implications for individuals' financial planning and decision-making.
Conclusion
The Spring Budget is a crucial event that can directly impact individuals' finances through changes to taxation, benefits, and other fiscal policies. As an expert in public speaking and communication, I can provide valuable insights into how these announcements may be communicated to the public and the potential impact on individuals' financial decisions.
