There seems be a trend. Most of the key issues that will be disclosed this week seem to have been leaked to the press prior to the actual budget speech. For example:
- Inheritance tax (IHT): the government will fulfil its election promise and increase the tax free value that couples can leave to their families to £1m. Presently, the limit is £650,000. The change is reported to apply from April 2017.
At present estates for individuals are exempt up to half this value – £325,000 – the higher limit of £650,00 applies to married couples (and those in a civil partnership) where the first deceased spouse’s estate is not subject to IHT and their unused exempt amount is automatically transferred to the surviving spouse. Presumably the change in April 2017 will increase these limits to £500,000 and £1m.
- Tax relief on pension savings: at present contributions into pension schemes are deductible at the saver’s highest rate of tax. According to the Conservatives’ pre-election pledges, the changes to IHT set out above will be funded by the removal of this higher rate relief. Presumably, tax relief will be limited to the 20% basic rate.
- Tax credits: as part of the government’s continuing efforts to reduce public expenditure it is mooted that the present levels of tax credits are to be reduced. We will have to see which of the benefits, and by how much, these reductions will affect low income families.
Next week we will highlight the actual changes announced. What we are unlikely to see are unexpected “give-aways”…