The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
The Budget 2015: What should you expect?
As all eyes fall on George Osborne for Wednesday’s delivery of the Budget, we wanted to share our thoughts with you as to what might be in store. We’ve come a long way since 1853, when a no-doubt tetchy audience yawned on as William Gladstone rambled on for 285 minutes in his Budget speech. Had said audience been around to see Gordon Brown’s rendition in 2000, it would have felt like a whirlwind by comparison as he clocked in at just over 50 minutes.
Perhaps it was Gladstone’s lengthy soliloquy that inspired the tradition of the Chancellor indulging in an alcoholic beverage while speaking, and it’s one the likes of Ken Clarke (whisky) and Benjamin Disraeli (brandy and water) willingly took advantage of.
Osborne, who usually opts for the water, might go for something stronger this time around given the added significance of May’s General Election. Although spending plans have already been announced for 2015/16, pandering to public demand will always be the temptation with voters heading to the ballot boxes in just over seven weeks.
So what can we expect?
2015 is one of the tougher Budgets to predict, given how few details have been leaked. The Chancellor has already announced that personal tax allowances will be increasing from £10,000 to £10,600 this Budget, but the possibility of further increasing this threshold remains; if not now, then perhaps a promise to increase it over the life of the next Parliament might be the result.
The higher-rate tax threshold may also rise. The level at which this tax applies has been out of sync with inflation levels, thus resulting in more and more people falling into this bracket. Addressing such an imbalance would surely win a vote or two.
For soon-to-be pensioners, the incoming reforms are now well documented, and the Budget itself will likely serve simply as a reminder of this. However, for existing pensioners locked into annuities and feeling as though they’ve missed the boat, the idea of selling an annuity for cash has been mooted, and it seems probable that the wheels for this will be put in motion on Wednesday.
Are we going to get squeezed?
The bold announcement that the national deficit will be eliminated by 2017/18 leaves precious little wiggle room for any pre-election freebies, especially with the current deficit sitting at 88% of last year’s GDP. Some £30bn would need to be generated in the next few years, either from spending cuts or tax increases.
One means of sparing consumers and businesses the burden is by clamping down on tax avoidance and evasion. There have already been hints from Osborne that a HMRC crackdown could be upon us, and it seems a likely course of action in the wake of recent corporate scandals. In addition, Capital Gains Tax for non-residents on any gain in the value of property will be kicking in from 6th April, which will also take some of the strain off the general public.
What about Lending ISAs?
The date of announcement for the decision on ISAs has remained a well-kept secret. Even if it isn’t made during the Budget speech itself, the expectation is that the decision will be made public before the end of the month.
Last year’s Budget represented a landmark day for the peer-to-peer lending sector, as Osborne announced that people would be able to hold P2P loans within an ISA. What remains to be seen is whether these loans will now be included within the Stocks & Shares wrapper, or if a separate ISA will be created. For Lending Works and other P2P lending platforms, the latter would be considerably more favourable in terms of clarity of the unique risk profile of this asset class, and research by the Peer-to-Peer Finance Association showed that 74% of consumers favoured the introduction of separate ISAs too.
Given the air of unpredictability - and Osborne’s knack for causing a surprise or two - it promises to be an interesting week. Yet should the Conservatives be ousted in the General Election, the likelihood is that Shadow Chancellor Ed Balls will deliver another Budget later this year, rendering some of Wednesday’s plans null and void.
However, the inclusion of P2P lending within ISAs will be here to stay regardless, and next week could mark the beginning of a new era for the industry – one that we at Lending Works are very excited about!
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