The first Budget since October 2018 is set to be delivered by chancellor of the exchequer Rishi Sunak today (March 11), against a backdrop of a growing public health crisis, an oil price war and base rate cuts.
The chancellor will present his plans for the coming legislative period this afternoon. Here’s what advisers can expect from the Budget:
1 Some taper tinkering
Many are predicting Mr Sunak will raise the point at which tapering of the annual allowance kicks in from £110,000 to £150,000.
These new proposals are expected to give doctors and others caught by the tapered annual allowance greater clarity over whether they risk being hit with a significant tax bill.
Under current rules, the taper gradually reduces the annual allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.
2 A tax relief shake up
In more pensions predictions, there has been speculation over changes to the pension tax relief in a bid to make the system fairer for those on lower incomes.
Before Sajid Javid suddenly resigned as chancellor last month, he was considering cutting tax relief to 20 per cent across all income bands, rather than having the 40 per cent enjoyed by higher earners as under current rules tax relief is paid on savers' pension contributions at the rate of income tax they pay.
According to Royal London’s Clare Moffat, head of business development, this could undermine auto-enrolment and potentially cause some to be double taxed.
However several Tory MPs have expressed unease at such proposals, casting doubt over whether Mr Sunak will go ahead with them.
3 The end of entrepreneurs relief
Today’s Budget could see the end of entrepreneurs relief — the rules which allow business owners of two years or over to pay less capital gains tax when they sell (10 per cent rather than 20 per cent).
There have been reports Mr Sunak is set to scrap the tax relief in today’s announcement.
Bosses at companies such as Gunner & Co and Soprano Mergers and Acquisitions have previously warned abolishing the relief would see fewer sellers come to market, including in the adviser space.
4 No tax jumps
During December’s general election campaign, prime minister Boris Johnson guaranteed not to raise the rate of income tax, VAT or national insurance.
The Conservative’s manifesto stated: “This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”
In fact Mr Sunak is expected to raise the national insurance threshold to £9,500 in today’s Budget, a move the Tories claim would be a tax cut for 31m workers.
5 IR35 confirmation
Today’s Budget could see the final nail in the coffin for those campaigning against the government’s controversial changes to off-payroll working rules.
The rules, more commonly known as IR35, are anti-tax avoidance rules which were introduced in 2000 to all public sector contractors and freelancers who do not fall under HM Revenue & Customs’ definition of being self-employed.