Investment Insights - Hot Topics October
Welcome to Balance: Wealth Planning's Hot Topics!
Budget Special
Welcome to Balance: Wealth Planning's edition of October Hot Topics – Budget special!
Every month, our financial planners collate the latest 'Hot Topics' within the profession, to update you regularly as they occur and cover any frequently asked questions you have.
This month, all eyes and ears are on the budget. As the UK gears up for the Chancellor's announcement on 30th October, the stakes are high. The government is walking a tightrope, aiming to boost economic growth and tame inflation - all while tackling the £22billion 'black hole' in public finances. But what does this mean for you and your financial future?
In this newsletter, we break down the key areas of focus and expert predictions that could shape the future of the UK economy.
What to expect from the Autumn Budget 2024
Predicted key focus areas
1. Economic growth & inflation
The government is set to introduce measures that stimulate economic growth without letting inflation spiral out of control. This delicate balance aims to ensure that the economy continues to expand while keeping prices stable.
2. Public spending & debt
High public debt from pandemic-related spending means the government will likely adopt a fiscal restraint approach. However, strategic investments in health, education, and infrastructure will remain a priority to support long-term growth.
3. Taxation changes
Some of the rumoured, but not confirmed, tax changes include:
Aligning Capital Gains Tax (CGT) with income tax rates for higher earners.
Removal of Business Relief (BR) from Inheritance Tax.
The inclusion of pensions within the taxable estate upon death.
Increased National Insurance on pension contributions made by employers.
Corporate tax incentives for sectors like R&D and green technology.
While speculation is high and changes are likely, nothing is set in stone until the announcement on 30th October 2024. In the meantime, we believe it's important to remain focused on long-term planning, make decisions based on the current rules and adapt as necessary to make the best of the new regime, however that may look.
What can history tell us?
As financial planners, we know how much historical data can tell us. Looking back, the biggest shifts in taxes and spending typically occur in the first budget after a new government takes office. It signals their priorities and puts a stamp on the economy by balancing growth and managing deficits.
Labour's 1997 budget, delivered by Gordon Brown, focused on stability and public finances. It lowered corporation tax from 33% to 31%, planned to introduce a 10% starting rate of income tax, and committed not to increase personal income tax rates.
The Conservative-Liberal Democrat coalition government in 2010 targeted austerity and deficit reduction. George Osborne raised VAT from 17.5% to 20%, increased the personal allowance to help low and middle-earners, and started a phased reduction to 20% for corporation tax.
Under the Conservative government in 2015, George Osborne continued to focus on austerity, boosting employment and making welfare reforms. Tax changes included a new inheritance tax threshold on family homes, a new tax-free dividend allowance, corporation tax being cut again to 19%, and National Insurance being simplified to encourage employment.
Market analysts are watching closely, predicting the budget will align with the Bank of England’s cautious monetary policy.
Navigating the impact of the Budget
One thing that is certain to come from the upcoming budget is change.
At Balance: Wealth Planning, we’re here to help you understand and adapt to these changes. Whether it’s adjusting your income strategy or reviewing your tax planning, our team of experts is ready to ensure you feel secure about your financial future.
Stay tuned for our post-budget analysis communications, where we’ll discuss the final decisions and the implications to financial planning.
Please note: This update is not financial advice and is provided for information only. You should not take any action before speaking to a Financial Planner, who will confirm what suits you.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.