The Chancellor of the Exchequer Philip Hammond will reveal the government’s plans for the UK economy in his last Budget before Brexit on Monday, 29 October.
The Budget is an annual speech which sets out the government’s plan for tax and spending in the new financial year, which starts on 6 April 2019. This year’s Budget is particularly important, as it’s the last fiscal update we’ll get before the UK leaves the EU.
Many of the announcements and the detail contained in the red Budget book released after the speech will have a direct impact on your money.
On the eve of the speech, here’s what we know about the Budget so far and what experts are predicting will be announced on the day.
What’s going to be in the speech?
It’s hard to know exactly what will be in the Chancellor’s speech but we know a few of the main things he’ll discuss.
The first part of the speech usually contains numbers which reveal whether we are on track with reducing the deficit, growth targets and borrowing. These are based on the latest forecasts from the Office for Budget Responsibility (OBR).
The rest of the speech normally focuses on the Chancellor’s plans for spending on things such as the NHS, social care, housing, transport, education and other public services, as well as the tax changes that will fund these plans.
Will you get a pay rise?
The Conservatives pledged to raise the personal allowance – which is the amount you can earn before paying any income tax – to £12,500 by 2020.
So, we could see the Chancellor increase the allowance from £11,850 to come closer to this target.
The threshold for higher rate tax is also expected to rise to £50,000 by 2020. Currently, it stands at £46,350, so this could also be edged up to ensure the pledge is delivered.
What’s going to happen to benefits?
Many working-age benefits have been frozen until 2019-20. These include jobseeker’s allowance, employment and support allowance, some types of housing benefit, and child benefit.
However, the state pension is expected to rise by 2.6% for the next financial year, while a range of other benefits will rise in line with September’s inflation rate.
It’s unlikely that Hammond will list out all the details of these changes. This will be in the red Budget book that is published as soon as he sits down.
What giveaways are anticipated?
In past Budgets, the Chancellor has included some giveaways that benefit some or all of us. Here’s some of the speculation of what will be featured in this year’s speech.
Fuel duty freeze
In the Conservative party conference speech, Theresa May dismissed speculation that fuel duty could go up for the first time in nearly a decade.
So, fuel duty is likely to be frozen for the ninth year in a row, at an estimated cost of £800m to the Exchequer.
Cost of a pint protected
The Chancellor will also reveal how the so-called ‘sin taxes’ on cigarettes and booze will change.
Last year, the Chancellor froze the duty on ciders, wines, spirits and beer – so he could do the same to boost pubs and other small businesses.
New tax relief for landlords
Speculation is mounting that landlords who have taken a hit in previous Budgets could be given a tax break this year.
The proposal would see landlords being made exempt from capital gains tax (CGT) if they sell their home to a tenant that has lived in their property for at least three years.
Currently, landlords that sell a rental property must pay up to 28% CGT on profits.
The Sunday Times says the plan, which was floated by Conservative think-tank Onward, is being considered for inclusion in the Budget on Monday.
Help to Buy to be extended
The future of the government’s Help to Buy equity loan scheme is still up in the air.
The scheme, which helps those with small deposits buy a home with a government loan, is due to close in 2021. But details have been sparse.
The government has not been clear on whether it intends to extend it, scrap it or amend it and many think the Chancellor will use next week’s Budget to set out his plans.
What’s the tax hike speculation?
Ahead of any Budget, there is much discussion of which area of tax the Chancellor will tinker with to deliver a boost to his spending power.
This year’s no different, with the Chancellor juggling delivering on Prime Minister Theresa May’s promise to fund the NHS with an extra £20bn a year by 2023 and the Brexit bill.
Here’s what some of the speculation has been focused on.
Pensions tax raid
The Chancellor has been hinting that he will be targeting pension tax relief in the budget.
Speaking at the IMF annual meeting in Bali Philip Hammond said there are set to be cuts to ‘eye-wateringly expensive’ pension tax breaks.
Experts predict that a flat rate of relief could be introduced and further changes to the lifetime allowance and annual allowance.
National insurance overhaul
The government has pledged to not raise income tax or VAT, but it could still find a way to crack down on National Insurance Contributions (NICs) to raise some cash.
Some, including accounting firm Price Waterhouse Cooper, say a rate rise across all classes of NIC or adding NI to salary sacrificed pension contributions could be on the cards.
But the changes could be more targeted at specific groups.
The BBC reports that the Chancellor could announce new rules that target workers who set up private companies to avoid paying higher National insurance contributions.
The Treasury believes that as many as a third of people claiming self-employed status could be classed as employees.
Both employees and employers pay less National insurance using this loophole, which is estimated to cost £1.2bn a year by 2023 according to the BBC.
Inheritance tax shake-up
Inheritance tax could also be in the firing line this year.
One change could be to look at simplifying the complicated system of gifting.
Currently, you can give away £3,000 each year as a ‘main gift’ as well as make an unlimited number of smaller gifts worth up to £250 each to anyone you haven’t given the main gift to. There’s also a wedding exemption ranging from £1,000 to £5,000.
One move could be to replace all these allowances with a flat £10,000 gifting limit, according to Sean McCann of NFU Mutual.
Tune in to Which? Money for live Budget coverage
We’ll be covering the 2018 Autumn Budget speech live from 3.30pm.
Join us for coverage of the key announcements as they are revealed on the day.
You can also put any burning questions you have about what the Budget means for you to Which? Money expert Gareth Shaw at 4.30pm on our Facebook Live Budget special.