The Spring Budget: What Could Be in Store for Your Finances?

The Spring Budget is fast approaching on March 6th, and there is intense speculation about what Chancellor Jeremy Hunt has in store. With the general election rumoured for November, this is the government’s final opportunity to outline plans before voters head to the polls. While some measures like the NI cut have already been confirmed, many details remain unclear. Let’s explore what could be announced and how it might affect your money.

Tax Cuts – Off the Table?

Previously, Hunt was considering a 2p income tax cut, saving basic rate taxpayers around £448 annually for someone earning £35,000 p/a. Further national insurance reductions were also discussed. However, with the economy now in recession, Hunt has supposedly shelved these plans.

Nonetheless, we may still see valuable tax changes. Inheritance tax and child benefit reforms are possibilities. Currently, estates below £325,000 are typically exempt from inheritance tax. Above this threshold, a 40% rate usually applies. Speculation suggests this could be reduced or abolished completely, though cutting income tax may take priority.

The £50,000 threshold at which child benefit starts being withdrawn may also increase. This would assist households impacted by inflation. Right now, people start repaying 1% of child benefit for every £100 earned above £50,000. By £60,000, it is fully withdrawn. Raising the threshold could ease this burden.

Lifetime ISA Shakeup

After being challenged Lifetime ISA penalties, Hunt seems open to reform. Individuals aged between 18-39 can open these ISAs, depositing up to £4,000 yearly with a 25% bonus up to £1,000. Funds can go towards a first home under £450,000 or alternatively retirement.

But with house prices up 29% since 2017, the £450,000 cap looks outdated. Hunt may raise it to £500,000 reflecting market growth. The 25% withdrawal could also be cut to 20%, stopping savers being disadvantaged for making ISA withdrawals. This follows lobbying from money experts like Martin Lewis calling the existing penalty unfair.

Curbing Mid-Contract Price Hikes

Another move being considered is banning mid-contract broadband and mobile price rises. Currently, many providers can raise prices annually by 3-4% above inflation, hitting customers with unpredictable increases. For example, major broadband suppliers like BT and TalkTalk recently confirmed rises of around 8% from April.

Ending mid-contract inflation-linked hikes would increase certainty for households. These unpredictable clauses have been strongly criticised as they leave little option but to accept ever-increasing bills or exit contracts early with penalties. The chancellor seems to be listening and may outlaw this practice.

Students in Focus

Students struggling amid the cost-of-living crisis may also get help. Maintenance loans have fallen behind inflation since 2020/21, leaving a £1,500 annual shortfall according to universities. Hunt could finally uprate them properly to assist cash-strapped student.

The Verdict

While major tax cuts look off the table, the Spring Budget could still bring welcome relief through reforms to areas like inheritance tax, child benefit and Lifetime ISAs. Steps to increase certainty around bills are also plausible, like banning mid-contract price hikes. And students may see their income boosted to help manage rising costs.

With the election nearing, Hunt needs to show voters he understands their financial pressures. Tweaks in these areas would signal real action to help ordinary households. Of course, we’ll have to wait for March 6th to see exactly what emerges in the red box. But there are reasons to be cautiously optimistic the Spring Budget could deliver some positive news for our finances.

For more information contact Ballards LLP at 01905 794 504

Disclaimer. This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.