Wednesday, 9 March 2016

Budget 2016 - predictions

It seems there is a budget every few months these days, but it is still once a year. Yes, there are Autumn statements etc. but this is the big one. As we build up to the big day, which is Wednesday 16th March this year.

The Budget is where George Osborne makes a speech about the Governments plans for the economy, based on all the latest forecasts from the Office for Budget Responsibility or as it is commonly known the OBR. The main thing people have their eye on though is tax changes for the following year.

The is will be Mr. Osborne's seventh Budget. When the Government got that shock victory last year he did an emergency budget in July.

Income Tax
There are all sorts of predictions and rumours. It is felt that there may be some income tax changes for the middle classes. This would probably be in the form of a raise in the 40% threshold up to
£50 000, lifting many out of paying the higher rate tax. There could also be a move on the top rate of 45%, as the previous reduction generated an additional £8 billion for the Exchequer.

There has been a lot of press surround tax relief on pensions. It looked like we were heading for some serious reductions in relief. But all the news is now saying that it isn't the right time to do it, but it will come... So we may see some nibbling at the pension allowances instead, such as restricting salary sacrifice etc.

Public Spending
We heard from Mr. Osborne about the dangerous cocktail in the global markets. Growth in the UK has been a bit slower than expected. He has been warning of us perhaps needing to undertake further reductions in spending. After the last spending review, the Chancellor was able to slow down some of the cuts, but he may well have to review that and speed it up again.

Given the price of oil at the moment, and the need to find places to earn extra income, fuel could well be a target. There are a lot of MP's saying don't touch the fuel duty as it hits the poorest in society, which is true. Mr. Osborne removed the automatic increases we saw under the 13 years of Labour, but this could well be too tempting for him.

Other things
Capital Gains tax is bound to be a target for the Chancellor, given that Capital Gains Tax raised more than Inheritance Tax last year, and he reduced some of the rates a few years ago. There is also the triple lock on income tax, national insurance and VAT to narrow the options. Redundancy payments have been mentioned a bit too, at present, there is no income tax or NI on redundancy payments up to £30K. This could be changed to look at how long someone has been in service, and bring NI into the equation.

The Rabbit from the Hat
This has to be getting harder and harder for the Chancellor. He has managed to keep something hidden and had a few things that the press have got very excited about, like the Living Wage etc. However, this might be one of his more challenging budgets which will make the Rabbit Pulling virtually impossible. There will be some populist thing in there, but that will probably be the 40% tax threshold.

We will all find out next week, but one thing looming over this budget will be the EU referendum...

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