● PERSONAL TAXES
The tax-free personal allowance was originally due to go up £630 to £8,105 as part of a long-term plan to take everyone earning below £10,000 out of income tax.
That increase will be accelerated – almost doubled, in fact – as part of a plan to help low-earners more. But the scheme is costly. PwC estimates it reduces the Treasury’s revenues by £500m to raise the threshold by just £100. So the chancellor would need to find spare funds elsewhere.
In exchange for helping those at the bottom of the income spectrum, the chancellor will announce a timetable over which the 50p top rate will be withdrawn.
Twenty million income tax payers will receive an extra annual statement from 2014-15 showing how much tax they pay and where it goes, in an £800,000 per year initiative to boost transparency. In time that will increase to all income tax payers.
Drinkers and smokers are expected to be hit by the regular rise in vice duties, long regarded as a steady source of income for the government, which has made a habit of attacking unhealthy habits.
The chancellor could even go so far as imposing a minimum price per unit on alcohol, after the government recently highlighted the dangers of cheap booze.
However, drivers could escape another fuel duty rise if Osborne takes pity on motorists hit by recent oil price rises by postponing or scrapping August’s planned 3p per litre rise. But he will be tempted by the cash as an extra penny on duty raises around £500m for the Treasury.
Osborne has faced heavy criticism for cutting child benefit from higher-rate taxpayers, and may either raise the cut-off point or smooth the transition between those who do and do not receive the benefit.
Savers could be set to suffer if the higher rate tax relief on pension contributions is axed or cut to basic rate relief only. There are also fears the chancellor will reduce the amount which can be saved tax-free each year, as well as the overall size of the pot that can be accrued.
The government has long called for a simplification of the tax system, and harmonising income tax and national insurance may be a large step in that direction. However, it would be complex and may be too big a reform for this budget.
A mansion tax or full wealth tax is off the cards. Although business secretary Vince Cable favours an annual levy on those with valuable homes, it would be administratively difficult and would have perverse effects – for example, hitting those with one home valued at just above the threshold, but missing a property tycoon with dozens of homes each just below the cut-off point. It would also hammer pensioners.
However stamp duty on properties sold for £2m or more will be raised from five per cent to seven per cent, a move which will hit the London property market.
A loophole in the stamp duty land tax regime will be closed today. Houses can change hands without paying the tax if they are owned by foreign companies and the shares in the company, rather than the property itself, are sold. It has generated negative headlines about foreign firms dodging tax, and could represent an easy tax raiser for the Treasury.
At the other end of the market, activity has been supported in the past year by a stamp duty holiday for first time buyers on properties under £250,000. The break comes to an end later this month, and Osborne may be tempted to extend it further or even scrap the tax for everyone in that bracket completely.
Stalled housing projects will receive a £150m boost to re-start construction, contributing to a total fund of £570m which the government hopes will enable 16,000 homes to be built, creating 30,000 jobs.
It is also possible that the chancellor will seek to boost spending on renovations with a highly targeted cut in VAT to five per cent for home improvements.
The overall planning framework may be changed at the same time as the Budget, making the rules more favourable towards development and potentially providing a major construction-led boost to the economy.
Small businesses are set to receive cheap loans as the government will launch a £20bn guarantee scheme, cutting interest rates by one percentage point.
SMEs might also benefit from a national insurance holiday, potentially aimed at cutting the cost of hiring young unemployed people.
Firms should also benefit from a cut to corporation tax, which is being cut gradually to an end-goal of 23 per cent.
That could be accelerated, though, as the government hopes to push the UK up the international tax competitiveness rankings. PwC believes cutting the headline rate to 23 per cent tomorrow would move Britain from 18th in the list of most competitive places to do business up to 14th. A simplification of the payments regime beyond that could easily take the UK into the top 10, its experts believe.
A new general anti-abuse rule (GAAR) will also be brought in to clamp down on the most aggressive tax avoidance schemes. It intends to create a level playing field and more certainty in the tax code, but will probably have to be tested by legal cases before firms know exactly where they stand on minimising their tax liabilities.
Deputy Prime Minister Nick Clegg has made several speeches on the benefits of employee ownership of firms, leading to speculation tax breaks or supports may be given for share ownership schemes or firms converting into co-operatives.
Banks could be hit by an increased levy if the charge is deemed to have raised too little from the industry this year.
● INFRASTRUCTURE AND INVESTMENT
Pension funds are expected to invest £2bn in infrastructure by the end of next year as the first stage in a longer-term plan to encourage private investors to fund projects like road, rail and power station construction, as well as running and maintenance. Increased use of toll roads is one option the government will consider to attract private investment.
The North Sea oil and gas industry will be hoping for an investment boost from increased tax reliefs after a surprise tax raid last year which led to a sharp fall in investment in the industry.