Budget 2015 predictions

George Osborne has developed a fondness for pulling rabbits out of hats, which makes Budget 2015 predictions tougher than in the days when half of it would be leaked in the weeks before the Budget speech.

Last year, nobody predicted a radical and dramatic change to the pensions system: in the Autumn Statement we weren't expecting Stamp Duty reforms.

This year we can expect Osborne to try to offer something that appeals to voters before they head to the ballot box. His challenge is that he has to manage this while also maintaining his tough stance on cutting spending - so every measure will have to be paid for with a bit of pain elsewhere.

Tax

Personal allowance
We already know that the personal tax allowance will increase from £10,000 to £10,600 this Budget, as Osborne has already announced as much.

At the very least we'll get a reminder of the savings we will make in income tax in 2015-16. There's also the possibility that he could increase the threshold a little further. This could, for example, include a promise to increase it to £12,500 over the life of the next Parliament.

Married couples allowance
This is another measure that's already on the cards, but Osborne will take the opportunity to remind us of the tax break that could save some couples £212 in tax a year.

Capital Gains Tax
Another measure kicking in this April is the fact that non-residents will be charged Capital Gains Tax on any gain in the value of their property. The gains will be calculated from 6 April 2015.

Higher rate tax
Osborne has had some critisism for the fact that the level at which higher rate tax applies hasn't kept pace with inflation - so more and more people are paying higher rate tax each year. One option is to announce an increase in the higher rate tax threshold - and if he pushes implementation into the future, he won't have to worry so much about paying for it.

Inheritance tax
NFU Mutual has taken the bold step of predicting that the big tax giveaway of the Budget will be inheritance tax: specifically an end to the 55% tax on unused pension pots after someone dies. It says it would be another vote-winning, landmark change, which would be popular with the all-important grey vote. Osborne could also consider bumping up the IHT threshold (a key policy with his party faithful).

HMRC crackdown
One easy way for Osborne to claw back cash in order to give more away elsewhere is by clamping down on tax avoidance and evasion. Everyone likes this kind of move, so it's a win-win. He's already hinted that this will be part of his Budget announcement - partly as a response to the HSBC tax scandal.

Government efficiencies
This is another measure that everyone loves: cost-cutting that doesn't affect front line services. It's going to get tougher to squeeze even more savings out of a government that's already been squeezed pretty hard, so we could expect Osborne to get a bit creative in freeing up cash from his government departments.
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Pensions

Osborne's pension changes will take effect from April, so we will get a reminder of how much better life will be with the new freedoms in place. We could well get a bit more tinkering too.

'Matching'
Pensions minister Steve Webb talked a few weeks ago about the possibility of a government "matching" scheme - whereby pension contributions would be matched by the government in order to encourage people to save more.

Cutting higher rate tax relief
This would need to be paid for, and one of the front-runners for potential hits to pensions is a slashing of tax relief on pensions for higher earners. So keep your eyes peeled for reductions in tax relief, a shrinking of the lifetime limit and a reduced annual allowance.

Annuities
Another idea that has been aired already is that the government could introduce the ability to sell your annuity for cash - to allow current pensioners to take advantage of the new pension freedoms.

Savings

Pensioner Bonds
These were enormously popular with a key voter group, so we could see Osborne cash in on the goodwill by extending the bonds until well after the general election (assuming the Conservatives take power).

Other bonds
Commentators all agree that savers have struggled to find anything approaching a reasonable rate of interest in recent years, and that there's scope to bring them some relief in the Budget. There's little in terms of concrete predictions, but something along the lines of pensioner bonds - but for other groups of people - has been touted as a potential option.

Tax breaks to pay for care
This is a tricky subject for the government, which has struggled with helping people pay for care - because it's just such an enormously expensive area for any government to get to grips with. One option could be a specific tax-efficient vehicle designed for people to save towards the possibility they will need care in their old age. For those who don't use it, provision would have to be made for them to be able to pass it on to subsequent generations for the same purposes.

Business

We can expect some moves to support business. The Confederation of British Industry has been urging Osborne to make life easier for medium-sized companies, with more investment allowances and extending research and development credits.

Given that Osborne increased the annual investment allowance to £50,000 but it is due to drop back to £25,000 at the end of this year, there's a reasonable chance he will take the opportunity to extend it indefinitely.

The oil and gas industry
The North Sea oil industry has been dealt a massive blow with the falling oil price, and Osborne has already made noises about supporting it. There's a good chance this will mean dropping the supplementary charge on profits. It's already set to go from 32% to 30% in December, but he could well announce that it will drop even further.

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