The Budget will be the last one to be held in March, with future fiscal statements moved to the Autumn, with one a year, rather than the two we have had. Therefore, it is not expected that there will be radical moves announced by Chancellor Phillip Hammond, with those saved for later in the year. However, eyes will be focused on what post-Brexit Britain will look like, as we approach the triggering of article 50 and any changes that will make a difference to personal finances. Below are a few areas we will be looking out for:
- Measures towards solving the Social Care funding crisis- Long term care costs can amount to tens of thousands of pounds and can erode all the wealth that someone has carefully built over their lifetime. Consequently, there has been frequent calls from commentators for the government to do more to help solve the social care funding crisis. So far insignificant progress has been made towards this problem. A lifetime care cap of £72,000 (on total fees paid towards care) was due to come in 2016, but has been delayed to 2020. Reports in the weekend papers predicated that the Chancellor will inject £1.3bn into social care, which is increasingly under pressure from local government budget cuts, but we’ll be watching for any specific measures announced to encourage people to save towards care costs, such as by making it tax-efficient to do so. A change in the triple lock state pension, which guarantees a rise at the highest of either the rate of inflation, average earnings or 2.5%, average earnings or 2.5%, to raise more money for social care funding has been mooted, but would be an unpopular move.
- Post Brexit Britain- The outlook for the economy post Brexit will dominate the speech. Aspects to look out are the expectations for borrowing over the next five years, compared to the previous forecasts, given the Chancellor will want to retain fiscal flexibility given the uncertainties around Brexit. The rising inflation rate alongside low interest rates are enough to give consumers and savers cause for concern, and the economic picture is likely to become more complicated.
- Pension tax relief- The pensions regime has gone through a significant amount of change- mostly for the better, when the flexibilities are used in an appropriate and considered way. As the burden on state finances grows, with the roll-out of auto-enrolment, there is expectation that the Government may deal with this by making changes to pension tax relief to save money. This could be through a flat-rate of relief for taxpayers, rather than defined by your income tax bracket, or trimming the annual or lifetime allowance for pension savings.
- Confirmation on tapering the Money Purchase Annual Allowance – An announcement could be made on the outcome of the consultation into the reduction in this allowance, which limits anyone who has started withdrawing from their pension from saving more than £4,000 a year (currently £10,000). It is expected to be confirmed, but many are calling for a rethink as the move goes against the grain of the pension freedoms.
- Making Tax Digital- This programme will require businesses with turnover above £10,000 per year from April 2018 to report their income and expenses to HMRC every quarter. Alongside this, there are other pressures that small companies face, such as the changes in business rates due to the come into effect in April and passing on inflation to consumers without depressing sales. Ministers have been considering whether to raise the threshold and defer the changes for some small businesses.
- Details on the National Savings& Investments’ bonds– These bonds were first announced in the Autumn Statement and the Chancellor stated they would be launched in the Spring. Therefore, a specific date may be announced. As the maximum investment is £3,000, it is hardly rewarding for savers, with only £66 a year able to be earnt in interest. A balanced portfolio of investments is more likely to generate attractive returns for investors. While the Chancellor said two million people are due to benefit, we must remember the website crashing due to demand with pensioner bonds and so we shouldn’t hold our breath on these.