By Lyndsey Hall
It’s that time of year again. That’s right, the Budget will be announced tomorrow, and we’ve got a few predictions to share with you.
The price of non-renewable fuels could come under the microscope again this year, with the manufacturing industry body, EEF, requesting a reduction in the carbon price floor, or the carbon tax.
While it’s possible that income tax and National Insurance (NI) may eventually be combined into one single ‘earnings tax’, in the meantime Osborne could raise the threshold to lower the amount of NI paid by low earners. From 6th April 2014, the income tax threshold is due to increase to £10,000, however, employee NICs begin to be charged at 12% on earnings above £7,956, so low earners are not yet free from tax.
The Trade Union Congress (TUC) is pushing for higher tax breaks on investment, and has requested that the Chancellor reverse plans to reduce tax on company profits.
Osborne may decide to extend the £250,000 annual investment allowance, which is due to drop back to £25,000 at the end of 2014. The allowance means businesses are able to offset 100% of their spending on office equipment, furniture, machines, tools etc. against the tax they pay. For more on AIA, see here.
Adoption of auto-enrolment continues, with all businesses with 160 or more employees expected to have completed the transition by 1 April 2014. This year, the Government could cap or even increase the annual and lifetime allowances for pension contributions, which are due to decrease in April to £40,000 and £1.25m respectively. Many would like to see the allowances start to increase annually, after years of cuts. The £3,600 pension contribution rate, on which we receive 20% tax relief, could also be increased to £5,000.
There have been calls from the British Bankers Association (BBA) for Government to implement a workplace savings scheme, similar to the workplace pension scheme, whereby employees would pay part of their salary into an ISA. This could be done via ‘salary sacrifice’, which would also be tax efficient.
The Housing shortage desperately needs to be addressed, last year less than 110,000 new homes were completed in England, which is the lowest number for four years. According to the National Housing and Planning Advice Unit (NHPAU), we need an estimated 280,000 new homes per year “to restrain the long-term rise in prices”. If the number of homes being built does not increase, house prices will continue to rise, in line with supply and demand, making getting a foothold on the property ladder even less affordable. There are also calls for the Help to Buy scheme to taper out rather than end abruptly in March 2016.
Stamp duty could also be capped at £250,000, saving those buying houses between £125,001 and £249,999 from the current 1% fee.
What are your predictions for the Budget 2014? Do you think there will be any surprises? Let us know your thoughts in the Comments.
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