Experience suggests that attempting to anticipate what will be contained in a forthcoming budget is a difficult if not impossible act, particularly with an election on the horizon in early May.
The problem for the Chancellor is that absolutely anything that announced in March before the election will have little or no real impact on the pockets of the people who will be voting in May. All he can really do is attempt to reassure the voters that the economy is in good hands and advertise what may be on the horizon if those hands remain on the tiller.
Nevertheless, there are a few things we could expect to see.
I am sure that the Chancellor intends to flag up further increases to the personal allowance which, from April 2015, will sit at £10,600 after benefiting from a small increase of £600 last year. I suspect he will also set out his plans to move the allowance towards the ultimate goal of £12,500 by the end of the next parliament.
He will also want to appeal to those who just fall into the higher rate band of 40%. There has been an indication that the Government intends to increase this threshold to £50,000 by the end of the next parliament and so the Chancellor will be looking set out how he will get there so voters can see clearly what they are voting for.
The Chancellor has already set out plans to alleviate the tax faced by savers, with the introduction of the New Individual Saving Account (NISA), coupled with the reduction of the 10 per cent saving rate to nil and the increase in this band to £5,000. This means that anyone with total income, including savings income, of £15,600 from April will not face tax on their savings income.
This was a popular move when it was announced, and given that interest rates remain low and are only likely to rise very slowly, the Chancellor may wish to make this more attractive to savers. Therefore, I think a further increase in the savings nil rate band is possible, perhaps in the range of £6,000 – £7,500, with a modest increase in the NISA allowance.
There has been some speculation surrounding inheritance tax but I don’t think there will be much movement here, given that the Government have already said that the nil rate band, currently sitting at £325,000, will not increase until April 2018. Although it is possible that the Chancellor will want to set out how this band will move during the next parliament, I would not hold your breath on this one. Indeed, the Government could tighten up some of the reliefs, possibly in the area of agricultural property relief. While I do not envisage a major shift in the mechanics of that relief I can perhaps see the Chancellor restricting the relief for those who let land.
We shall soon find out.
