This Wednesday (Mid-day March 6th), the Chancellor Jeremy Hunt is due to deliver the Spring UK Budget for 2024. Now that the UK is officially in a recession and the incumbent struggling Conservative Party less than a year from a General Election, what can he do to help assuage the individual Budgets of voters?
The first thing to reach for when making attention grabbing headlines in a Budget are tax cuts. Could Hunt try this at the dispatch box? Well, he's already cut national insurance for both the employed and self employed - the latter seeing their cuts starting this April. He also abolished the Class 2 NIC's for the self employed.
There are rumours that the existing two percent cut to the main national insurance band could be extended to three percent, essentially taking PAYE NICs down from 12 percent to 9 percent - but this depends on how much money is available in the Budget without having to makes cuts to services elsewhere. Could we also see the return of the promise of a 19 percent rate for basic tax (down from 20 percent)?.
Would the Chancellor finally stop relying on the effects of fiscal drag and unfreeze the personal allowance and higher rate thresholds. The UK has seen huge stealth tax rises through, the effects of freezing tax thresholds.
The OBR (Office for Budget Responsibility) have drawn up unexpected forecasts this week that leave little room for Hunt to make giveaways - something that could leave him scrabbling and removing the ability for people to claim a non-dom status for taxes and thus raise near £4 billion a year for the Treasury. This is in contrast to OBR reports around the time of the Autumn Statement last year where the Chancellor thought he would be able to spend an extra £13 billion a year by now.
Non-dom status is claimed by near 70,000 people, allowing foreign nationals who reside in Britain to make money outside of the UK and not pay UK tax on it for up to 15 years, as long as the income or capital gains are not brought back into the country.
There are other things the Chancellor could offer to gain votes, such as maintaining the fuel duty freeze, increasing the threshold for stamp duty,
Hunt says he is focusing on delivering a Budget for economic growth and focused on bringing down inflation, which is stubbornly still double the two percent target.
There were apparently plans to once again try to revive the housing market and help people stuck in 'rental traps' with 99 percent loan-to-value mortgages, though the exact mechanics of this were unknown, possibly a form of government loan guarantee. These plans have now been scrapped. Interestingly Skipton Building Society does offer a 100 percent mortgage where no deposit is required and the rental track record is used as an affordability test.
We will continue to monitor for any leaks coming out before the Budget itself, but be sure to follow us live on Wednesday as we update on the changes announced. Tools and calculator updates will follow shortly after.