Our predictions for Jeremy Hunt’s spring Budget: is 2p off NI possible?
- Oops!Something went wrong.Please try again later.
Could our National Insurance payments be cut by a fifth next week? The Chancellor is reportedly tempted to cut the main rate of NI on employees’ contributions from 10p in the pound to 8p in the Budget on March 6 a dramatic bid to catch voters’ attention and make a dent in Labour’s strong lead in the opinion polls.
A new vaping tax could be introduced to help pay for any NI cut. Alternatively, Jeremy Hunt could cut the main rate of income tax – although perhaps by only 1p in the pound, as reducing income tax costs more than cutting NI – or increase income tax thresholds.
Here, we cover the practicalities of the Budget announcement and attempt to foresee its likely contents. We’ll update this article as the Budget approaches.
When is the spring Budget?
The Budget will take place on March 6. Normally the Chancellor begins to speak at about 12.30pm, as soon as Prime Minister’s questions have ended.
How can I watch it live?
You can keep informed of the latest news, predictions and what it means for you in the day’s Budget blog, and we will be streaming Chancellor Jeremy Hunt’s statement live from 12.30pm.
You can also join The Telegraph’s consumer champion Katie Morley and Associate Editor Camilla Tominey as they discuss what the Budget means for your money and for the future of the Government.
Will Jeremy Hunt cut taxes?
Mr Hunt has pursued something of a “will he, won’t he” approach to possible tax cuts, seeming to promise them in one speech, then hinting that they would be unaffordable in the next. But one commentator said he had raised hopes of tax cuts among his backbenchers so much that he would “struggle to get out of the Commons alive” if he failed to do something in the Budget speech.
Income tax
Blick Rothenberg, the leading tax and advisory firm, was one institution to say a 1p cut in the basic rate of income tax was a likely option. Experts at a pre-Budget conference at the Resolution Foundation, a think tank, last week agreed that a cut in the rate of income tax was the most likely of the possible ways to put more money in voters’ pay packets before the election.
Torsten Bell, the foundation’s chief executive, pointed out that Rishi Sunak had expressed a wish to cut the basic rate to 16pc in time in his pitch to Conservative party members in the leadership election.
Alternatively, the Chancellor could cut the rate of National Insurance as a means to put more money in voters’ pockets. As a cut in NI costs less that the equivalent cut in income tax, he could even consider a 2 percentage point cut in NI contributions. Treasury analysis shows a 2p cut in the basic rate of income tax would cost £13bn while a 2p cut in employees’ National Insurance would cost £9bn.
However, analysts at the Institute for Fiscal Studies, the respected think tank, have warned that such a big cut would be unaffordable.
Personal allowance
One alternative to a cut in the rate of income tax or NI would be to end the policy of “fiscal drag” and raise the tax-free personal allowance to take some account of wage inflation, which has been running at high levels to keep up with prices.
Recommended
The true cost of Sunak’s stealth tax raid on middle class families
Blick’s experts said that, while an increase in the personal allowance looked less likely than a cut in the rate of income tax this time, the Budget could outline the Government’s plans for the allowance in future.
New taxes on vaping
Mr Hunt is reportedly considering new taxes on vaping as a means to help fund cuts in income tax or NI. If he does tax vaping, he is thought likely to increase taxes on tobacco so that smoking remains the more expensive choice.
99pc mortgages
Young people could get on the housing ladder with a deposit of less than £2,000 under new scheme designed to help first-time buyers that could be announced in the Budget. The Treasury is considering a plan that would allow borrowers to put down a 1pc deposit to secure a property, with the rest coming from a 99pc mortgage backed by the state.
VAT
Other possible tax changes include a cut in the rate of VAT on energy-saving materials supplied by builders (householders already benefit from a tax break if they buy the materials directly), and bringing the VAT on electricity for electric cars supplied at public charging stations in line with the lower rate that applies if you charge your EV at home.
The Chancellor could also reintroduce tax-free shopping for tourists, which might encourage more to choose Britain over other destinations. Blick said any new tax-free shopping regime could be administered by retailers rather than the Government, which meant it was likely to run more smoothly.
Inheritance tax
Could the Chancellor cut inheritance tax? Experts at the Resolution Foundation’s conference said it was most unlikely. “It would send a very strange message [to voters],” one said. However, changes such as the abolition or curtailment of the “business relief” tax break or making pension assets liable to IHT, possibly to fund a cut in the main rate of IHT, were possible.
Sources at Westminster say a cut in IHT at this Budget has been ruled out, although proposals for change could appear in the Conservatives’ election manifesto.
The Resolution Foundation’s panel also discounted the chance of any rise in fuel duty in an election year.
Lifetime Isa penalty
The Chancellor is considering cutting the early access penalty on Lifetime Isas from 25pc to 20pc for first home buyers, PoliticoEU has reported. Such a change would mean that anyone who needed to withdraw cash from their Lisa early or for a home worth more than the scheme’s limit of £450,000 would lose the government bonus but not their own savings.
This could be announced alongside an increase in the £450,000 limit on homes that can be purchased with a Lisa. It is not clear whether any changes would also affect those saving for retirement.
“Such a change would make Lisas even more attractive for groups such as the self-employed,” said Helen Morrissey of Hargreaves Lansdown, the investment company.
Will any taxes go up?
One possible rise, Blick said, is the imposition of VAT on the full price of a ride with Uber, Bolt or similar “ride hailing” services. Currently, VAT is charged only on the difference between the charge to the passenger and the amount paid to the driver. The change would result in a rise in the amount paid by the passenger of about 15pc, the firm said.
What are the changes the Chancellor should make, but won’t?
Blick’s experts said Mr Hunt should make more small companies eligible for the lower rate of corporation tax of 19pc by increasing the threshold. This, they said, would encourage more overseas companies to set up in Britain, because such subsidiaries are often quite small.
The Resolution Foundation panel said the introduction of a “Great British Isa” to boost investment in London-listed companies was unlikely, although other measures with that aim were possible.
Budget trivia
Why do you never see the Speaker of the Commons during a Budget?
Traditionally the chief deputy speaker, who goes by the title of Chairman of Ways & Means, chairs the Budget debates rather than the Speaker. The current Chairman of Ways & Means is Dame Eleanor Laing, so she is likely to preside over this year’s Budget.
By tradition, the Chancellor, unlike ministers at the despatch box at any other time of the year, may drink alcohol during the Budget speech if they wish. Former chancellor George Osborne chose to drink mineral water. Other chancellors have chosen mineral water (Gordon Brown and Alistair Darling), whisky (Kenneth Clarke), spritzer (Nigel Lawson), gin and tonic (Geoffrey Howe), brandy and water (Benjamin Disraeli) and sherry and beaten egg (William Gladstone), according to the Parliament website.
Gladstone also holds the record for delivering more Budget speeches than any other chancellor: he gave 12 of them.
What would you do in Mr Hunt’s shoes? Tell us in the comments below
Recommended
Spring Budget 2024 with Katie Morley and Camilla Tominey
