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With the Spring Budget only a week away, here are some of the key things to look out for in Chancellor Jeremy Hunt’s statement this Wednesday:
The government has suggested extending the ‘free’ hours of childcare to one and two-year-olds – raising costs by an estimated £10 billion – but of course these ‘free’ hours won’t be free, with the government paying such a low fee to nurseries that parents will be paying for top-ups and extras so that the nurseries can keep afloat.
Jeremy Hunt has made the Energy Price Guarantee less generous, just as the government are about to stop the monthly rebate we’ve all been getting off our bills – at the same time, the Cost of Living support payments for those on certain benefits is lower. If Hunt scrapped the universal Energy Price Guarantee and boosted the cost of living support, more assistance could be given to those who are struggling the most.
The Child Benefit High Income Charge has been stuck at £50,000 since it was launched in 2013. With wages, inflation and childcare costs all soaring, it seems unfair that a single-income family wouldn’t be entitled to any child benefit, while a couple who both earn £50,000 would get the full benefit.
The government could scrap the threshold, entitling people with any income to child benefit, or it could raise the threshold to a higher rate.
The current plan is to increase the state pension age to 67 by 2028 and then again to 68 by 2046. The government could accelerate the proposed rise to age 68 in the 2030s. But the pandemic has caused a shift in life expectancy, so any raise of pension age at the moment seems particularly shaky.
This is one of the reasons that MoneyMagpie encourages you to raise your own retirement pot. (see links here)
The IFS (Institute for Fiscal Studies) has called for IHT and income tax to be applied to pensions on death. If the government followed this line, there could be controversy over how those who have contributed to pensions on the basis of the existing death benefits rules are protected.
The MPAA money purchase annual allowance currently peanlises those who have flexibly accessed taxable income from their retirement pot with a £36,000 reduction in their annual allowance, from £40,000 to just £4,000. The Chancellor is also facing ongoing calls to ease the pressure on the NHS, with pension tax rules which have pushed thousands of senior doctors to retire early at the heart of the controversy.
A dark cloud looms over the prospect of adding any more pressure onto UK businesses while many are still recovering from the pandemic,
After the upset from the mini-Budget last autumn, the Chancellor needs to help those who need it and create stability without strangling the growth needed for economic prosperity.
MoneyMagpie’s Jasmine Birtles weighs in on the above issues, saying, “Jeremy Hunt’s plan to tax us till we squeal is already taking effect with the average income tax rise over the last year being around 3% extra. So what I would like to see is no more tax increases. What we will probably see is several tax increases, most of them ’stealthy’, although it’s getting harder and harder for the government to hide tax grabs as we’re all getting a bit wise to their tricks!
“Some subjects that worry me are the possibility that Hunt will reduce the total amount people can have, tax-free, in their pension pots and the same with their ISA holdings. That would be very unpopular with higher earners, although it might not affect the lower earners who are saving less. I’m also concerned that he won’t listen to businesses and scrap the increase in corporation tax.
“What I think we will see in the spring budget, is some sort of measures to encourage over-50s back into work. That’s something the government is clearly concerned about.”