The final fiscal event before a general election is usually packed with treats for winning over voters. We’ve seen speculation about potential tax cuts, from inheritance tax to income tax and stamp duty.
But while tax cuts might hit the sweet spot for some voters, there could be a price to pay further down the line. And there are other changes that could bring better financial resilience right now and in the future.
Here are the nine things we want to see in the 2024 Spring Budget.
This article isn't personal advice. ISA, pension and tax rules can change, and any benefits depend on your circumstances. Tax rates and bands are different for Scottish taxpayers. If you're not sure what's right for you, ask for financial advice.
1. No more talk of a ‘British ISA’
Having an extra ISA allowance specifically for investment in British companies would add complexity, could fail to attract investment, and could end up adding risk for investors.
A better alternative might be to boost the overall ISA allowance. This could raise more capital for listed companies, without limiting the potential for diversification, and without adding another layer of rules.
2. Lifetime ISA reform
If you withdraw cash from a Lifetime ISA (LISA) before age 60 for any reason that isn’t buying your first home, you pay a 25% penalty. This doesn’t just take back the government bonus, but eats into your money too. This penalty should be cut to 20%, so only the bonus is lost.
We also think people should be able to open a LISA until the age of 55 to support the self-employed saving for retirement. Currently you have to be under 40 to open. And, given property price rises, we also think the £450,000 limit on the value of a first home bought with help from a LISA should be reviewed.
3. Lifetime Pension
The autumn statement announced a call for evidence on the introduction of a Lifetime Pension.
A Lifetime Pension would let people choose what pension to pay into through their workplace. This could help them engage with pensions and avoid having too many to track.
We think the Chancellor needs to keep supporting this.
4. Auto-Enrolment extension
The Auto-Enrolment Extension Bill had Royal Assent in September. The government should press ahead with a timetable for reforms – far enough in advance to let people properly plan.
5. Money Purchase Annual Allowance
The £10,000 contribution limit for people who’ve taken pension income is designed to stop people over 55 sacrificing salary for pensions and then immediately withdrawing it for the tax break.
But this stops people being able to rebuild a pension when they’ve taken an income, so we think it needs replacing with specific anti-recycling rules.
6. Advice/guidance boundary
Personalising how we talk to people, based on their behaviours and financial position, helps them make better financial decisions. But there are rules about how companies like us can offer personalised guidance to clients. This is called the advice/guidance boundary.
There have been positive steps from the government and Financial Conduct Authority, who have prioritised their review of the advice/guidance boundary, and this momentum needs to keep going.
7. More considered changes to income tax
Frozen tax thresholds are doing damage to our finances, and are set to cost us much more than was originally thought. Cutting the rate of tax while keeping thresholds frozen doesn’t make a lot of sense, so it’s important that the government considers income tax as a whole in the Budget.
8. Revisiting dividend and capital gains threshold cuts
The dividend and capital gains tax (CGT) allowances are both set to be halved from 6 April to £500 and £3,000 respectively.
Stopping the cuts would relieve pressure on investors and entrepreneurs and could help promote the government’s drive to encourage investment into UK companies.
9. A review of inheritance tax allowances
Cutting the inheritance tax (IHT) rate might be popular with the growing numbers whose estates are set to pass the allowances. However, it wouldn’t do anything to encourage people to support their families with gifts during their lifetimes, when they might need it most.
So, any changes to IHT should include a review of the gifting allowances.
We’ll be keeping a close eye on what we want to see change in the 2024 Budget in March. To make sure you don’t miss out on what does change and what it could mean for you, sign up to our Editor’s Choice email below.
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