As UK Chancellor of the Exchequer Jeremy Hunt is poised to deliver the Spring Budget to the House of Commons on Wednesday, wealth managers discuss what they’ll be watching for and what sits high on their wish list.

With the ruling Conservative party facing a 20 percentage point gap to the opposition Labour Party, according to recent polls, the Spring Budget is one of the last opportunities UK Chancellor of the Exchequer Jeremy Hunt could have to try and restore his party's fortunes ahead of the upcoming general elections later this year.

A sore point for many voters is how thresholds for income tax, such as the standard, 40 per cent and top 45 per cent bands, haven't kept pace with inflation, which means that people are pushed into paying higher rates. This "fiscal drag" affects millions of people.

As far as any tax changes go, hopes focus on individual savings accounts (ISAs), cuts in income tax, National Insurance contributions and inheritance tax. However, the scope for tax cuts appears limited. In the Autumn statement, despite pressure to cut or even remove IHT, it was not included in the package. Inheritance tax is typically paid at a rate of 40 per cent over certain thresholds; money can be passed on IHT-free to a spouse or civil partner, who will then also inherit the allowance when they die. Abolishing the non-dom status, or drastically changing how it works, is also one of several measures the Treasury is thought to be considering to pay for any tax cuts.

Here are views from wealth managers on what they think could be contained in the Spring Budget.

IHT
Andy Butcher, branch principal and chartered financial planner at Raymond James Investment Services
“Speculation that the Chancellor could cut or even abolish inheritance tax seems to be dissipating, with signs that he is looking elsewhere to provide some financial respite to the electorate. The AIM market will also be relieved to hear that Jeremy Hunt is looking for tax cuts in other places, as the abolition of IHT would make this market fall significantly.”

Investec Wealth & Investment
“Changes to ISA rules and possible reforms to inheritance tax rules are among the potential announcements in this week’s budget but the scope for tax cutting is limited. There is continuing speculation that IHT, which raised £6.3 billion ($8 billion) between April 2023 and January 2024, could be amended or scrapped.”

Nicholas Hyett, investment manager at Wealth Club
“Reintroducing inflation-linked tax thresholds is one area where high net worth investors feel there is room for particular improvement. This isn’t a surprise – stealth taxes have been slowly squeezing taxpayers across the income spectrum. High net worth investors have been particularly hard hit by those freezes – given that they are more likely to face the whole range of income, capital gains and inheritance taxes.” 

ISA changes
Investec Wealth & Investment (UK)
“Possible ISA changes include the launch of a British ISA allowing investors to buy a certain amount of UK company shares without paying tax and reforms to the Lifetime ISA such as increasing the maximum property limit it can be used to buy from £450,000 and reducing or scrapping the 25 per cent withdrawal penalty. House prices have risen 29 per cent since April 2017 when the Lifetime ISA was launched.”

National insurance contributions
National Insurance Contributions (NICs) were reduced for individuals from 12 per cent to 10 per cent in the Autumn Statement.

Gene Salerno, chief investment officer, SG Kleinwort Hambros
“Tax cuts are plausible, in the form of reduced National Insurance, as this would appeal to a wide swathe of voters. However, we believe that previous plans for wider cuts, such as income or inheritance taxes, are less likely to come to fruition following the International Monetary Fund’s  latest warnings. Although wholesale energy prices are falling for unrelated reasons, we expect the government to spin this as a policy win.”

“In an election year the pull of reducing taxes is going to be strong, and therefore all bets seem to be placed on a modest reduction in National Insurance,” Andrew Dixon, head of wealth planning, SG Kleinwort Hambros.

Income tax
Frédérique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia  
“We estimate that a fiscal giveaway, possibly in the form of personal tax cuts, and as large as £20 billion, is likely. But this fiscal largesse, combined with wage settlements still above 5 per cent, and above-inflation price increases in a wide array of services ranging from broadband to insurance, mean core services inflation could remain [subdued].” 

Investec Wealth & Investment (UK)
“The key focus is likely to be on changes to personal taxation including possible cuts to the basic income tax rate of 20 per cent with a 2p cut costing an estimated £14 billion ($17.7 billion) a year and a 1p cut in the region of £6 billion to £7 billion, according to the Institute of Fiscal Studies (IFS). A further 1p cut in the rate of National Insurance following a 2p reduction at the start of the year would be cheaper for the government at around £5 billion a year, the IFS says.”

Corporation tax
Toby Tallon, tax partner at professional services firm Evelyn Partners
“In April 2023 corporation tax was raised from 19 per cent to 25 per cent on profits above £250,000. Given the pressures on public finances, we are unlikely to see this increase reversed in the Spring Budget.

“However, announcing a pledge to progressively reduce the rate over the course of the next Parliament, say to 22 per cent, could provide more valuable longer-term certainty for entrepreneurs and business owners if other political parties felt compelled to align similar fiscal policies in their manifestos.” 

Non-domiciled individuals (non-doms)
Tom Clougherty, executive director of the free market think tank, the Institute of Economic Affairs
"Abolishing non-dom status, introducing a vape tax, and extending windfall taxes on oil and gas risk unintended negative consequences too – with little fiscal upside. I hope this speculation doesn’t indicate a last-minute scramble to keep to the fiscal rules. Tax policy should be made for the long term – not on the fly in response to a rolling (and changeable) five-year debt forecast.”

Pensions
In the Autumn Statement, Hunt maintained the pension triple lock in full, which means that the state pension will rise by 8.5 per cent in April. The government also announced plans to launch a consultation on ‘pot for life’ reforms which would give workers the right to nominate the pension scheme they want their employer to pay contributions into.

Investec Wealth & Investment (UK)
“Pension announcements in the Spring Budget could include more detail on the lifetime provider model, or ‘Pot for Life’ while the age for being automatically enrolled into workplace pensions could be reduced to 18. There may also be changes to the pension saving annual allowance focused on the NHS.”

Capital gains tax
Andy Butcher, branch principal and chartered financial planner at Raymond James Investment Services
“The introduction of a British ISA or capital gains tax breaks for UK listed companies would be a welcome addition to the Spring Budget. This would significantly improve the attractiveness of British companies at a time when investors have fallen out of love with our markets. Driving up domestic companies’ share prices will encourage overseas investors to re-focus on the UK and reinvigorate local financial markets. Rising markets help attract companies to list in the UK, providing a boost to the City of London. It also helps UK investors as much of their invested assets in pension funds are listed in the UK.”

Investec Wealth & Investment (UK)
“Campaigners are calling for plans to halve dividend and capital gains tax (CGT) allowances to £500 and £3,000 respectively due to come into effect from 6 April to be reversed.”

Toby Tallon, tax partner at professional services firm Evelyn Partners
“Entrepreneurs are liable for capital gains tax at 20 per cent on profits made from a sale of their business. The main targeted relief, Business Asset Disposal Relief (BADR), enables entrepreneurs to claim a 10 per cent rate of CGT on a relatively meagre £1 million of lifetime gains. This compares with a more generous limit of £10 million of lifetime gains which applied from April 2011 until March 2020. A more progressive relief regime to increase this lifetime limit would be welcome. Alternatively, a more targeted rollover relief regime could be introduced to incentivise entrepreneurs to reinvest proceeds, within a certain time period, into new business ventures.”

Make VCTs more attractive
Toby Tallon, tax partner at professional services firm Evelyn Partners
“VCTs (Venture Capital Trusts) are investment companies that are listed on the London Stock Exchange and set up to invest in small UK businesses that meet certain criteria. To encourage support for these businesses, and reflect the higher-risk nature of investing in them, the government offers generous tax benefits for investing up to a maximum investment of £200,00 per annum in VCTs.

“There are a couple of ways to make VCTs more attractive and help bring additional capital into the UK economy to unlock considerable potential further funding for small businesses. Increase the annual limit on how much an investor can subscribe to VCTs and receive tax credits. This has been stuck at £200,000 since 2004/05 and so is long overdue an increase. Increase the level of tax credits, to say 40 per cent, that an investor would receive on making VCTs investments.”