It will not be long before the Budget is upon us. Wednesday March 8 is the grand date (pencil it in your diary, if you have not already). Essential viewing for anyone interested in money matters.
Already speculation is mounting as to what Philip Hammond, chancellor, will pull out of his Brexit-crumpled hat.
No doubt there will be more tinkering to the taxation system. More complexity for us mere mortals – and you trusty financial planners – to deal with. The odd peace offering no doubt will be thrown our way to keep us happy but as sure as night follows day there will be a couple of nasty tax rises to keep the government’s finances on an even keel – and raise our hackles.
Of course, we already know some of the changes kicking in from April.
Lovers of Isas will be thrilled the annual allowance is jumping from £15,240 to £20,000. It represents a massive boost to the Isa regime and I am sure financial advisers will encourage clients to take advantage of it. The more Isa millionaires this country creates, the better.
April will also see the launch of the Lifetime Isa, a vehicle designed to encourage the young to save – for a home deposit or for their retirement a long time off.
It will be interesting to see how popular this savings product becomes and how strongly it will be marketed. Already, Nationwide Building Society has said it will not be playing ball while others are adopting a ‘wait and see’ approach. Lisa could be a slow burn.
We also know that from June, insurance premium tax will jump from 10 per cent to 12 per cent, raising an additional £680m of tax for the Treasury in the tax year beginning this April.
It will mean higher bills for our car insurance, home cover and for those still able to afford it, private medical cover. At a time of rising inflation and subdued wage growth these increases will eat into many household’s finances.
Whatever the Brexiteers may tell you, tough times lie ahead.
But as ever it is pensions where pre-Budget speculation is likely to reach something approaching fever pitch. I am not referring to the State Pension where arguments currently rage over the sustainability of the so called ‘triple lock’.
Although former cabinet ministers such as David Willetts (Mr Brainbox) have come out of the woodwork to argue that the guarantee should now be reviewed, it is an non-starter. The guarantee was part of the Conservative manifesto in the run up to the 2015 General Election so to scrap it before May 2020 (the next election) would be tantamount to political suicide.
I am referring to speculation over tax relief on pension contributions which I am sure will ratchet up a notch or two in the coming weeks.
Will Mr Hammond be bold and initiate major reform of the tax relief system – as his predecessor George Osborne once contemplated – or will he play safe and stick with the status quo? Will he introduce a flat rate of relief? Will he turn pension saving into a clone of Isas
