Budget 2024: Predictions

For predictions, read speculations. In previous years it’s rarely been accurate.

The cynic in me imagines several camps in Whitehall, all coming up with different fiscal scenarios on flipcharts.  With the two most likely to run leaked to the papers the weekend before the budget as A and B testing.  They read the room and then go with the option that will keep them in office. Liz Truss suffered a massive fail when she didn’t take any notice of this strategy.

So, what could be on the cards next week?

For one thing there’s not much in the change jar for Chancellor of the Exchequer Jeremy Hunt to play with, some estimates reckon he has £13bn – £6bn of which he’ll keep in his piggy bank.

On the one hand the Tories have said that they’d like to lower the heavy tax burden and historically Chancellors tend to announce voter attractive tax cuts on the lead up to a general election.

According to the polls Labour is robustly in the lead, meaning tax cuts haven’t worked their magic. With a ‘technical recession’ underway, the Chancellor might decide that further tax cuts may not be the best economic move.

So, if he’s been warned off large tax cuts, the Chancellor may be forced to find some middle ground in between the two strategies.

Fuel Duty

Fuel duty’s due to increase on March 23rd. However, it’s remained unchanged for the past 14 years.  It’s my guess that the Chancellor will continue the ongoing trend of not overturning reductions in fuel duty.

Income tax and National Insurance:

The word on the street is that the Chancellor could introduce a 2p cut in the income tax rate, but this is a very costly move, and I don’t think he’s got the headroom.

He could consider increasing the personal tax threshold. A vote winner amongst pensioners as it removes income tax on their state pensions in one fell swoop.

On the other hand, he could spread savings across a wider pool of taxpayers by further reducing the employee national insurance rate by 1p. This seems like the more likely choice as increasing the personal allowance may not be looked upon favourably by the IMF.

Inheritance tax

There’s less speculation around the abolition of inheritance tax. This may stay on the shelf to be reintroduced in the Conservative Party’s manifesto. A reduction in IHT is unlikely anytime soon for two reasons, as it takes a lot of planning, and it is widely seen as a tax-break for the wealthiest in society.

Child benefit threshold

I’ve recently posted about the High Income Child Benefit charge. Working parents have been penalised by this outdated threshold. With low availability in nurseries and rising childcare costs working parents have had to balance the financial benefit of returning to work. Will he, won’t he?

Tourism tax

The previous Chancellor Rishi Sunak implemented a policy to discontinue tax-free shopping benefits for tourists. This move impacted the hospitality sector; it’s been rumoured that the Chancellor has asked the OBR to look at the benefit/cost to the economy since tax free shopping was withdrawn. I’m guessing that it will be reinstated.

Non-Dom Status

Jeremy Hunt has also been mulling over scrapping the non-dom status in this budget. He’s previously defended the arrangements as benefiting the UK by encouraging well off individuals to live and work in the UK, but now the drive to generate more money is greater. I find it unlikely as it would undermine the competitiveness of London and frankly I don’t see him wanting to risk wealthy foreigners leaving.

Traditionally, in the year of an election tax cuts are usually a near certainty. While there may be a significant tax reduction, potentially affecting income tax or national insurance, it’s not clear if this will curry favour with the electorate.

I suspect there will be some suggestions test driven in the next few days, and then all will be revealed next week!

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