The 2016 budget will be announced on Wednesday 16th March, and many have begun speculating on the details of Chancellor George Osborne’s speech.
With public finances likely to be in a worse state than previously predicted, it is expected that there will be big cuts to public services. There have been backtracks on pension tax overhauls however, and there are strong indications that income tax brackets will be raised, meaning many people will stay in lower tax bands. Here is our summary on This Is Money’s predictions for this year’s Budget.
High earners may see their pension tax relief cut. This is Money claims that annual allowance for those earning between £150,000 and £210,000 per year could be reduced from £40,000 to £10,000. These savings for the government may be used to cover lower income earners or change how much allowance can be carried over if it is unused. It is also predicted that lifetime pension allowance could be reduced from £1.25 million to £1million.
In his July Budget last year, George Osborne increased Insurance Premium Tax from 6% to 9.5%. It is believed that another 3% will be added on to car insurance costs. Over 50 million car, home and pet insurance policies will be affected, with household insurance costs increasing significantly as a result.
We looked at the Help to Save scheme and how the government aims to help low paid workers to save by incentivised top-up bonuses. More details are expected to be announced in the budget, but we know that around 3.5 million workers will be able to save up to £50 per month into a Help to Save account with the government matching 50% of any contributions. Savers can take advantage of the account for a maximum of 4 years, earning a potential £1,200.
The link between business rates and the Retail Prices Index has attracted negativity from business and industry leaders, who have called for the use of the Consumer Prices Index measure of inflation. A big reduction in Entrepreneur’s Relief is also a possibility, meaning that more business owners could share ownership of a business with their spouse, potentially doubling the rate of tax relief on the sale of a business at the 10% tax rate.
We will have summaries of the 2016 Budget. Follow the Charles James blog for updates.