Proactive Investors -
- Non-dom status under threat
- Individual taxes likely to be cut
- National Insurance might be lowered again
- 99% mortgages off the table
- Budget is on Wednesday 6 March
99% mortgages off the table
The government has reportedly scrapped plans for taxpayer-backed 99% mortgages, according to a Telegraph article citing a Treasury insider.
“It’s off the table. It was one idea put forward by officials out of maybe 30. Headroom has drastically reduced since then, so we need to refocus the Budget,” said the insider.
A senior banking source added: “It was just a headline grabber. Most first-time buyers won’t be able to afford it anyway.”
Under the scheme, homebuyers would have been given a step onto the property ladder with just a 1% deposit, underwritten by the government.
Santander (BME:SAN) UK chief Mike Regnier earlier warned that the scheme would drive up risk for lender, despite the government backing.
1% homeowners would also be at risk of slipping into negative equity in the event of a fall in home prices.
Homebuyers can still find deposit-free mortgages on the market.
Skipton Building Society recently revealed its newly launched no-deposit mortgage has attracted around 500 borrowers, totalling around £62 million.
Non-doms could be scrapped
Non-domiciled status for millionaire ex-pats living in the UK could be scrapped in the forthcoming Budget to help Chancellor Jeremy Hunt raise cash, reports today suggested.
Under the current non-dom rules, foreign nationals who live in the UK, but are officially domiciled overseas, don’t pay tax on overseas income or capital gains.
Arguments for and against the scheme have been raging since the then Labour leader Ed Miliband first said he would scrap it in 2015.
Supporters say attracting high net-worth individuals to the country outweighs any potential tax loss.
Labour is proposing to bring a new more tightly controlled regime to generate £2 billion earmarked for the NHS.
One wrinkle for Jeremy Hunt is that PM Rishi Sunak’s wife Akshata Murty, the daughter of an Indian billionaire, was one of those people using Non-Dom status for her time in the UK until it was made public in 2022, since when she took herself off the register.
Another issue for Hunt is that he publicly defended non-dom status when Labour proposed its new policy.
“These are foreigners who could live easily in Ireland, France, Portugal, Spain. They all have these schemes. All things being equal, I would rather they stayed here and spent their money here,” he said in a radio interview.
According to the Telegraph, which ran the Non-Dom story, Hunt will announce tax cuts on 6 March with reductions in National Insurance or income tax or both likely.
Range of individual tax cuts possible
Tax cuts are a certainty in the Spring Budget but where and by how much has been sparking many debates recently.
Rob Morgan, Charles Stanley (LSE:CAY)'s chief investment analyst suggests “a modest package of tax cuts, mostly focused on individuals,” looks a likely scenario.
So what’s possibly on the table next week, according to Morgan.
Income Tax cuts
The personal allowance, representing the initial slice of income you pay no tax on, was £12,500 in April 2019 but if it had been raised in line with inflation it would be well over £15,000.
Yet it has hardly moved.
Similarly, the higher rate tax threshold which was £50,000 in April 2019 would be approaching £65,000 by now if it had been revised upwards with the Consumer Prices Index (CPI).
As a result, the freeze has drawn huge numbers of people into the 40% rate as wages have risen.
Some upward movement on the tax bands or a cut to rates would be welcome.
The £50,000 High-Income Child Benefit Charge threshold is also ripe for reform, says Morgan.
ISA allowance
ISAs (or Individual Savings Accounts) are one of the most tax-efficient ways of saving because any returns are tax-free, says Morgan.
"The Treasury is reportedly looking at increasing the amount that can be saved into them, and possibly carving out part of the allowance to be used only for UK shares.
“On the surface, a proposed additional allowance for UK stocks, a so-called ‘British ISA’, presents an elegant solution to two issues: The UK’s waning shareholder culture and the general lack of interest in the UK stock market, as well as the increasing tax burden on small shareholders.
The ISA allowance has been £20,000 since the 2017/18 tax year, so seven consecutive tax years at this level and another freeze for 2024/25 would make it number eight, so there could be some movement on the overall level this time around.
Inheritance tax
A reform of inheritance tax (IHT) would be popular with many traditional Tory voters and there are even suggestions that the tax could be axed altogether at some point.
IHT is charged at a rate of 40% on the value of estates worth more than £325,000, but if you are married or in a civil partnership you can pass on your allowance to your partner, meaning no tax is payable until the combined estate is above £650,000.
Inheritance tax could be reformed in some way, but it would be a significant cost to abolish it entirely, says Morgan.
Receipts amounted to approximately £7bn in the 2022/23 tax year and they are set to increase as the value of estates rise and the thresholds outlined above remain frozen.
A pledge to reform rather than a Budget surprise is more likely, he suggests.
CGT and dividend allowances
Many investors are being caught by reductions in the dividend and capital gains tax allowances and now report and pay tax on modest sums.
The dividend allowance was slashed in April 2023 from £2,000 to £1,000 and it will be cut in half again from £1,000 to £500 in the next tax year.
In the tax year 2017/18, it was £5,000.
CGT allowances have fallen from £12,300 to £6,000 for this tax year and will fall again to £3,000 from April 2024, so more people will have to pay tax on their investment profits.
Abandoning plans to reduce the thresholds for dividend tax and capital gains tax again would relieve pressure on investors and entrepreneurs alike.
Stamp Duty
Stamp Duty Land Tax is once again in focus with housing market activity slowing.
Presently, purchases of less than £250,000 do not incur stamp duty, but it is charged at 5% of the next £675,000 of house purchase value up to £925,000 and ratchets up further after that.
National Insurance cut
A reduction in National Insurance is one of several tax cuts being planned by Chancellor Jeremy Hunt in next week’s Budget, according to reports on 27 Febraury.
Hunt has already announced one cut in National Insurance, from 12% to 10% starting this year but is considering lopping a further 1% off the Levy to give a boost to the economy.
Known by critics as a “tax on jobs” the last NI cut was predicted to boost employment by around 28,000, but a further reduction would cost £4.5 billion according to the report in the Times and limit the scope for more headline-grabbing initiatives.
In an election year, hopes for the Tories seemingly rest on the Chancellor pulling something miraculous out of the hat next Wednesday, 6 March.
Vape tax under consideration says Times as chancellor looks to raise cash
Chancellor Jeremy Hunt could announce a new tax on vapes at next Wednesday's spring Budget.
Vaping products are subject to VAT but not the same levy as is applied to cigarettes.
Tobacco duty could also increase at the Budget, to ensure that vaping remains cheaper, sources told the Times.
Big tobacco firms Imperial and BAT (LON:BATS) fall on vape tax news
Last month, plans were announced for UK-wide restrictions on disposable vapes, to tackle the rise in youth vaping.
"Although the industry is jostling for position in the vaping market, given the volumes declines in tobacco, these products are still a relatively small part of the picture," Streeter said.
"Investors had also been expecting greater regulation in the sector, so a potential increase in tax isn’t a wild surprise and given they are global companies a change in UK fiscal policy won't move the dial too much."