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What the experts want to see in this week’s Budget

05 March 2024

Trustnet looks at what changes could be made in Jeremy Hunt’s 2024 Spring Budget tomorrow.

By Jonathan Jones,

Editor, Trustnet

Chancellor Jeremy Hunt faces a big Spring Budget on Wednesday ahead of an expected general election later in the year. While we will have to wait until tomorrow to see if any rabbits will be pulled out of his hat, there are some things experts clearly want to see.

Some of Hunt’s moves are already largely anticipated. A minor tax cut of between 1p and 2p is expected, although it is unclear as to whether this will be to National Insurance (NI) or income tax.

Yet there may be little to cheer, according to Jason Hollands, managing director of Bestinvest. “With the UK economy confirmed as being in a mild, technical recession, the impact on tax receipts is anticipated to limit the chancellor’s fiscal headroom for the kind of bold moves on tax that many Conservative MPs crave,” he said.

Below, we round up what else experts want to see in the much-anticipated Budget.


Great British ISA

Mike O’Shea, chief executive officer at Premier Miton, reaffirmed his firm’s wish for a Great British ISA, which would add another avenue for savers to put cash away tax-free.

“At Premier Miton Investors, we think more British savings should be going into British companies. And British tax breaks should benefit the widest cross section of the British economy,” he said.

The proposal is for a £5,000 new allowance, but not all are convinced. James Carter, head of platform policy at Fidelity International, said: “We believe it would be challenging to deliver and it’s not as clear cut that UK-listed companies would automatically provide more UK investment.”


ISA simplification

Rather than adding fresh ISAs, some are arguing that the current system is already too bulky. ISA simplification has been called for a few times in recent years and is on the minds of experts once again.

Carter said: “Most people will find themselves managing a series of evolving financial objectives over time. However, we know that many find it difficult to identify which products best suit their saving needs.

“Further proliferation of ISA types can create confusion for investors, but also can limit the economies of scale that providers can offer. This can stifle innovation and worse, can raise costs for end investors. Simplification and certainty of tax treatment can allow both savers and companies to better plan and manage the products.”

Combining stocks and shares with cash ISAs is one option, as well as improving the ease of transfers.

Tom Selby, director of public policy at AJ Bell, warned that this “may be off the table” given the impending general election, but said a consultation could be on the cards.

Lifetime ISA (LISA)

There are murmurs that the chancellor could cut the penalty for accessing LISA savings for reasons other than buying a first property or before age 60.

It is possible this will be cut from 25% to 20%, which Hollands said would be “welcome news”, particularly for younger people using the scheme. It was reduced during the pandemic but re-upped afterwards.

There is also talk of upping the limit on the value of a first home to above £450,000, where it has been frozen since its introduction seven years ago.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, added: “The change would certainly make the LISA more attractive, especially if coupled with an increase to the £450,000 limit on value of homes bought,” but urged the chancellor to go further.

“The reports do not mention if the penalty would be reduced for those saving for retirement. If it were, it would be of enormous benefit to groups such as the self-employed,” she said.


Capital gains tax (CGT) and dividend tax

Cuts are expected in the Budget, with both allowances slashed from next month: CGT is to drop to £3,000 and the dividend tax to £500.

Sarah Coles, head of personal finance at Hargreaves Lansdown, noted the government “has an opportunity to stop these cuts in their tracks”.


Inheritance tax (IHT)

Inheritance tax reform could also be in the crosshairs, with a suggestion to rethink the gifting allowance or increase thresholds for those that pay the hated tax.

Laura Suter, director of personal finance at AJ Bell, said: “Jeremy Hunt has reportedly described it as ‘pernicious’ and it would clearly delight backbenchers were he to raise the threshold for IHT, cut the rate of tax from 40%, or even abolish IHT altogether.”

Boost women’s finances

Rachael Griffin, tax and financial planning expert at Quilter, said the government could step in to help improve the financial situations of women, including bridging the gender pension gap – a knock-on effect of the gender pay gap, as well as the time taken off to care for children.

This “massively restricts women’s capacity to accumulate pension wealth in comparison to their male counterparts,” she said.

One option is to look at childcare. Last year the government announced it would expand childcare and provide 30 hours free per week to all parents with children over the age of nine months.

However, there is a reported £5bn funding gap that needs to be covered, otherwise “childcare providers will be unable to meet increased demand, likely leading to nursery closures and staff shortages,” Griffin said.

Another option is to change the child benefit system, with the high income child benefit charge increased for single-income households. This would be at £65,000 now if it had risen with inflation, she noted.


Things for retirees to watch

There are some suggested changes that would affect older people, Morrisey noted, including the aforementioned income tax cut, which could “also come with a corresponding cut in basic rate tax relief on a pension”.

Elsewhere, a group of MPs have urged the chancellor to consider cutting stamp duty for downsizers in the Budget as a way of freeing up more homes for younger families, she said.


Ideas from the people

Wealth Club asked its clients for policy suggestions with some unusual responses. One was to scrap National Insurance and combine it with a higher overall income tax.

Another was to reduce employers’ NI contributions for groups where the government is aiming to increase employment – such as those over retirement age or people with disabilities.

Abolishing taxes that bring in less than £1bn and reintroducing tax-free shopping for tourists to encourage more spending were also given consideration.

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