When chancellor Philip Hammond delivers the Autumn Budget on 29 October, what could be in store for your personal finances?
Philip Hammond, the chancellor, uses the annual event to reveal some of the ways in which he intends to spend the money that has been collected from us in taxes, and how he plans to collect more taxes next year.
The decisions that he makes will have a real impact on our everyday lives; how much we pay at the petrol pumps, how much we have to retire on, whether we can afford to buy a home, how much we can afford to save.
We will not know for sure what he plans to do until Hammond stands up at and addresses the House of Commons at 3.30pm that day.
However, as usual, there have been strong hints from the government and MPs, and speculation from the finance industry on what could be up for grabs.
We have already rounded up how the chancellor could change pensions in the Budget, for example, the likelihood that he cuts pensions tax relief or tweaks allowances.
Here are the top predictions for the remaining tricks and treats that the chancellor could have in his Halloween budget.
1. Saving could be simplified
There is an ever-growing number of Individual Savings Accounts (Isas) available, each offering different benefits. Some people have argued that there are now too many and what was a straightforward concept loved by millions has become too complicated and confusing.
Some experts have suggested the chancellor may take the opportunity to simplify the range of Isas.
Jon Hall, managing director at Masthaven Bank, says: “The simplification of the Isa regime has been a hot topic for some time now and we would welcome this. We need to make it far easier for consumers to save for their future.”
Rachael Griffin, tax and financial planning expert at Quilter, adds: "The magic of Isas is they have an incredibly strong and effective brand but this has gradually been eroded by various additions which only serve to detract from their simplicity.
“Preferably in this year’s Budget, rather than further tinker with these types of products, Isas should be left alone or if anything, combined so that more flexibility is offered within a single Isa – the so-called Everything Isa."
In September, Moneywise reported that one of the largest Lifetime Isa providers, Moneybox, had made several key recommendations to improve the savings product.
Mr Hall adds: “It’ll also be interesting to see if the new minimum basic savings rate proposed by the regulator will come to fruition to do more to encourage a savings society.”
2. Tax breaks for buy-to-let landlords, relief for renters
More support could be offered to renters and tax breaks for buy-to-let landlords, some have predicted.
Housing is one of the government's key priorities, and the chancellor may use this Budget to make changes to make life easier for those struggling with their housing situation.
A suggestion mooted by more than one right-leaning think tank is a tax break for buy-to-let landlords who sell to their tenants. This could make it easier for tenants to buy their own home as they may be able to buy at a cheaper price, and their landlord would be incentivised to sell to them.
Others have predicted that simpler changes will be prioritised.
Steven Cameron, pension director at Aegon, comments: “We expect the chancellor to focus on announcements, which while eye-catching are easy for government to implement.
“So we’re more likely to see changes in rates of taxes, than to the wider tax system. For example, a cut in stamp duty for first-time buyers and downsizers would be a welcome boost to parts of the housing market.”
Mr Hammond has already cut stamp duty for first-time buyers, however, which means that other owners could be in line for a break.
Jason Orme, property expert for The Homebuilding & Renovating Show, says: “The great danger that we’re in at the moment is accepting that the whole generation of people under 40 years old will not be able to own a home any time soon.
“The solution in my view comes through the planning system. There is a shortage of land in the UK to build on (depending on the surveys the figure ranges from between 2 to 10%) and this is all due to the planning system it operates on.
“If that were to be relaxed to allow individuals to take control of their own houses and allow exceptions when it comes to where they could put up a house, we would be boosting self-build levels significantly.”
3. Insurance could get more expensive
There is currently a tax charged on insurance, including car and home insurance, called the Insurance Premium Tax (IPT). The government has been raising the rate on this tax in recent years. In 2011, it was just 6%, but in 2015 was pushed up to 9.5%, 10% in 2016 and 12% in June this year.
IPT could be pushed up even further in this Budget. One reason for this is few people know about IPT so rises tend to go more under the radar than, say, fuel price increases.
With Theresa May committing the government to no further fuel duty rises, marking nine years of such a freeze, IPT may be in the chancellor’s firing line again as an alternative measure to soak motorists.
Premiums for motorists have been coming down of late due to changes to the Ogden Rate, so might not feel an IPT rise so keenly when they next come to renew their motor insurance. But motorists would not be the only ones affected.
Laura Suter, personal finance analyst at AJ Bell, explains: “Insurance premium tax is a sneaky tax that many will not know they are paying. But anyone who takes out an insurance contract will have been hit with this tax, which has doubled in the past three years from 6% to 12%.
"The tax has been blamed for the hike in car, home, pet and other insurances, representing a real hit to all households. It’s been estimated that each household now pays £200 more a year just due to the hike in this tax.
“The Government raised £6.1 billion in the past year from insurance premium tax – more than the tax take from IHT. The Government always takes the line that the tax is on insurers, who can then choose whether they pass it on to customers. Because of this it seems a cut to the rate is unlikely, but Brits may just be hoping it’s not hiked further.”
4. Income tax may not fall
The Conservative Party made a manifesto pledge to raise income tax bands for workers. It would mean that by 2020, the personal allowance would hit £12,000, which would mean that everyone in the UK could earn this sum without paying a penny of income tax.
The personal allowance is currently £11,850. It also pledged to increase the higher rate tax band so that it doesn't kick in until someone earns £50,000 - it is currently set at £46,350.
The move would save a basic-rate taxpayer £70 a year and a higher rate £340 a year.
However, rumours are swirling that the chancellor could drop or delay this pledge, arguing that it is simply unaffordable when budgets are tight.
According to reports in the Daily Mail, a “senior Tory source” said that the pledge was “up for grabs”. Pressing pause would provide extra cash to the tune of around £2 billion for the Treasury.
5. Ring-fenced NHS funding
Few people like paying extra taxes. But several recent surveys have found that people would find the idea considerably more palatable if they knew that the extra money they were being asked to pay was going directly to help fund the NHS rather than into a general pot over which they had no control or say.
One solution would be to create a ring-fenced "hypothecated" tax - one that could only be spent for a particular purpose. It could be helpful when trying to find the extra funding required for the NHS.
Rachael Griffin, tax and financial planning expert at Quilter, explains: “The NHS is currently critically underfunded, which is why Phillip Hammond confirmed at party conference that there will be an increase in taxes to help supply the NHS with a £20 billion-a-year boost.
“One idea, which could make the upcoming tax increase more palatable, is to show the increase separately to someone’s main taxes to illustrate that it’s earmarked purely for healthcare. Some argue that if it is clear what the money is being raised for the public is generally more sympathetic to it.
“However, the Treasury may rail against this idea as by ring-fencing taxes it is generally harder for the government to change its spending priorities and siphon taxes to meet other priorities such as crime or transport.”
6. Self-employed tax loophole crackdown
Private sector self-employed workers that only work for one employer could be in line for a crackdown. Currently, many workers function as self employed despite working only for one company, by setting themselves up as a 'personal services companies' (PSCs), as this provides a National Insurance tax break.
The Association of Tax Technicians (AAT) says, however, that the crackdown on public sector workers, so-called IR35 off-payroll working rules, has not worked so far, and should not be extended to the private sector.
Ivo Weevers, chief executive of the bookkeeper invoicing app Albert, agrees: "I confidently forecast that any resultant revenue raise for HMRC in the short-term from PSCs will prove negative in the medium- and long-term.
"If HMRC yields the ‘stick’ on PSCs often enough, many of them will simply close their businesses, and go back to paid employment at lower rates or swell the ranks of the unemployed, while those in their late fifties or older will retire if they can afford to."
Brian Palmer, tax policy adviser at the AAT, also thinks National Insurance increases for the self-employed unlikely: “National Insurance is a thorny area for some, with the self-employed paying less National Insurance contributions than those in employment. Many pundits supported Philip Hammond’s ill-fated proposed 1% increase in the rate of class four NI last year, but the post-Budget outcry led to him making an immediate U-turn.
“With the current various economic uncertainties, it is unlikely that any further attempt at change will come in this Budget but, at some point something is going to have to give.”
7. The price of beer could rise
So-called sin taxes - those payable on alcohol, tobacco or fuel - are often a clear target for chancellors.
They can raise taxes while arguing that they are doing it to support people's health, in the case of cigarettes, or simply slightly raising the cost of a discretionary item, in the case of booze.
Tobacco operates on an above-inflation escalator, designed to consistently make the noxious product more and more unaffordable.
Beer duty rises, however, are less easy to square, particularly in an environment where pubs are closing throughout the UK at a rate of knots.
This article was originally written by our sister publication Moneywise.
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