Nine key moves to watch out for in Wednesday’s Budget

Wednesday’s Budget is George Osborne’s last chance to impress the voters before the general election. Here, John Stepek looks at nine things to look out for.


Wednesday's Budget is Osborne's last chance to impress the nation before the election

This week's big event, of course, is the Budget on Wednesday.

It's George Osborne's last chance to impress the nation before the general election on 7 May. So even more than usual, this is all about the politics.

So what can we expect? Here are nine things to keep an eye out for when George whips out his red box on Wednesday

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

1. Trade in your old annuity

As we discussed on Friday, the idea of setting up a market for second-hand annuities would allow existing pensioners to access the pensions freedoms that Osborne drove through in his 2014 Budget. However, this is a complicated business.

The government has announced that it will consult on how to set up the market, and it aims to allow pensioners to sell their annuities from April 2016 but it'll be interesting to see how it works, and who's allowed to invest in the repurchased annuities.

2. Removing inheritance tax from Isas

Voters hate inheritance tax (IHT). It doesn't matter that most of us will never have enough money to pay it. We just don't like the idea. So the chancellor could exploit this and also encourage long-term saving by allowing money to be passed on within an Individual Savings Account (Isa) wrapper, as Jonathan Eley notes in the FT's Money section. He's already laid the ground by making Isas transferable between spouses.

3. More tax on rich foreigners

Rich foreigners are great. They don't have many votes between them, they're pretty price insensitive, and no one has any sympathy for them. So look out for changes to rules that target absentee foreign home owners, and taxes on high-value properties.

4. More tax on multinationals

Expect more detail on the so-called Google Tax'. This is designed to make multinational companies pay tax on business activity in the UK, rather than allowing it to be funnelled elsewhere. This is part of a global move to tax multinationals more, which is one good reason to be wary of getting complacent about the massive global blue chips in your portfolio.

5. Stick peer-to-peer loans in your Isa

Peer-to-peer (P2P) lending is a very tempting area of investment, particularly with interest rates so low. Trouble is, it's taxable and for higher-rate taxpayers, that puts a big dent in the appeal. But there are already pretty advanced plans for allowing P2P to be held in your Isa, and when that happens, it could well herald an influx of money into the sector.

6. Get people to understand National Insurance

National Insurance is incredibly fiddly. The idea of reforming it or merging it with income tax has always been a back-burner aspiration for anyone who claims to want to simplify the tax system. But because no one thinks that voters understand it, it's not seen as a vote winner. A good start might be to rename it I don't know, something like NI Income Tax' or maybe the Payroll Tax' which would make it harder for governments of the future to raise it sneakily.

7. Less tax on North Sea oil

Supporting British industry is always popular. And the oil industry has been hit hard by the collapsing oil price. A move to make life easier for North Sea oil companies might help maintain employment and also steal a tiny bit of thunder from the Scottish National Party.

8. Keep an eye on pensions contributions

Tax relief on pension savings is expensive, and it's also pretty generous, particularly for those on higher incomes. The chancellor might want to get rid of the 45% income tax rate at some point. But he's unlikely to do that ahead of an election. He could instead cap pension contributions tax relief at 40%, rather than 45%. That would steal a bit of Labour's thunder, but could also be spun as an implicit promise to ditch the 45% rate altogether come the next parliament.

9. If it smells like tax avoidance, forget it

Financial writers have to be really careful not to mix up tax avoidance and tax evasion the first is legal, the second isn't. But as chartered accountants Baker Tilly note, everything points to "the line of distinction between legal avoidance and illegal evasion being erased". Expect harsher guilty until proven innocent' penalties designed to put people off using any scheme that looks remotely like loophole-exploiting.

That's what we reckon Osborne will be looking at in his Budget but what would you like to see him do? Give us your answers (keep it civil!) in the commentsbelow.

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.