Speculation is unusually muted ahead of the Budget on 20 March. The chancellor faces demands from his own backbenches for tax cuts and from coalition partners for raids on the wealthy but expectations are for a ‘steady-as-she-goes’ budget.
In an unusual move, the prime minister, David Cameron, recently preempted his chancellor’s announcements, stating that there’s no ‘magic money tree’, further dampening expectations in the process.
Budget 2013 – what we already know
With the chancellor’s Autumn Statement increasingly resembling a mini-budget, we already know a host of measures that will come in from the start of the new tax year on 6 April.
We know that the personal allowance – the amount you can earn before having to pay income tax – will go up from £8,105 to £9,440. It is possible that the chancellor will increase this again, in line with coalition policy to raise it to £10,000 by 2015.
We also know that, from 6 April, additional personal allowance for pensioners will be frozen for those already over 65 and scrapped altogether for anyone turning 65 in the future. The basic state pension will go up 2.5% to £110.45 a week.
The Isa allowance, which can be split between a tax-free cash Isa and higher risk stocks and shares Isa, is due to go up to £11,520. There have been calls for the chancellor to allow more than half of the allowance to be paid into a cash Isa and for him to allow money in child trust funds to be transferred into newer Junior Isas.
Budget 2013 – Osborne under pressure
The recent cut to the UK’s AAA credit rating has dealt a blow to the chancellor and, amid fears of a triple-dip recession with a lack of growth hindering revenues, he is under pressure to change course.
Tory backbenchers, most prominently former defence secretary Liam Fox, have called for cuts to capital gains tax and corporation tax and there is some speculation that the higher rate of the former could be lowered from 28% to 25% in an effort to boost growth.
Meanwhile, Labour and Liberal Democrat calls for a ‘mansion tax’ on homes valued at over £2m have already been rejected by Osborne.
Budget 2013 – the latest speculation
The Funding for Lending scheme, which provides cheap money for banks in the hope that they increase lending to businesses and individuals could be given a boost – with Liberal Democrat calls for it to be ‘put on steroids’.
The self-employed could face higher national insurance contributions. The self-employed currently pay lower contributions as they don’t receive a top-up to the state pension. Under the proposed flat-rate state pension they will be entitled to the same as everyone else so there’s speculation that their national insurance will rise.
Could a freeze to the inheritance tax threshold be used to fund long-term care costs? Such a decision would mean more people would face inheritance tax in the future.
There is no expectation of any radical changes to income tax.