t4 Marketing Innovations Blog

2009 Budget

What will be in the Budget
for financial advisers?

This is the first of a series of posts about this year’s Budget. What might happen? What does happen? What it means for financial adviser businesses and how you might market your services to support clients afterwards.

The Chancellor’s budget takes place on Wednesday 22 April in what are unprecedented times for the UK economy. It is always hard to second guess what a Chancellor will do but we have been trawling the internet and here are some of the predictions from within the financial services industry as to what might happen.

In November the Chancellor announced a fiscal stimulus for 2009 with tax rises taking effect from April 2010 but this was based on a return to growth by mid 2009. The Chancellor no longer expects a return to growth this early.

The Treasury is now talking about growth in 2010 which is likely to be unsteady for a while. In these circumstances the tax rises already announced for 2010 and 2011 will take money out of the economy. In these conditions it is possible the government could defer several of the tax rises announced for 2010 and 2011. The Chancellor could therefore do something like defer tax rises but announce steeper tax rates at a later date as money is still required to finance government borrowing. This is the balancing act Alistair Darling has to perform.

Here are some of the measures he may introduce:

NI rate – delay in planned rise of employer’s NI rate?
The Chancellor has already announced a planned rise in employers’ National Insurance contributions from 12.8% to 13.3% from 2011. A lot of commentators are predicting this will be delayed to reduce financial pressure on businesses. A delay could also act as an incentive for employers to take on new staff at a time of rising unemployment. Some commentators are even speculating whether the Chancellor will actually announce a temporary reduction in NI.

Retraining schemes to receive tax breaks?
There may be tax breaks introduced for the cost of retraining schemes. This will help companies pick activity up when the recession begins to subside and help businesses adapt as they remodel themselves for the future.

Annual ISA investment limits to increase?
There needs to be more incentives for people to save with interest rates at historic lows. An increase in the ISA limits seems a real possibility. The Chancellor may also allow increases to the limits people may invest in cash to help re-capitalise the banking system.

Increase in stamp duty limits?
The housing market is currently showing tentative signs of reaching the bottom of the downward trend. Some analysts are predicting a further increase in stamp duty limits to help encourage the housing market which is so important to the UK economy.

Increase in small company rate of Corporation Tax postponed ?
The increase in the rate of Corporation Tax for small companies was to have increased from 21% to 22% from this month. This has already been deferred for a year. A few commentators have speculated that this could be abandoned altogether.

Other technical issues
Analysts expect the budget as a whole to be about short-term fixes and improving cash flow within the tax and benefits system. Tax receipts are down by £7 billion, the government has committed itself to massive public spending to support the banking system and there is little room for announcing tax increases to fill the gaps.

If improving cash flow is key expect to see some technical changes which may include changes such as these:

- Inheritance Tax and lifetime gifts – may see new rules about record keeping and life-time gifts.
- HMRC’s new Business Payment Support Service announced last autumn has helped businesses manage tax payments using structured payment plans. We may see more done in this area.
- New draft of an HMRC charter to set out HMRC service standards and make taxpayers rights and responsibilities clear is a possibility.

The big question?
Although this has come up many times and never seems to happen, the big question is will higher rate tax relief on pensions be affected? The saga of Fred Goodwin’s pension has put high pension contributions under the spotlight. Will the Chancellor do anything this time?

There will be further postings on the Budget – on any news, the speech itself and soon after on business opportunities for firms giving financial advice.

Innovator