Wednesday preview: Budget day finally arrives

(Sharecast News) - All eyes will be on the long-awaited and much-dreaded Budget on Wednesday.

Among the reforms being touted are a new tax on higher value homes, with reports suggesting that properties in council tax bands F, G and H will be revalued, and a surcharge imposed on homes worth more than �2m.

There has also been talk of a 1% 'mansion tax' on properties worth more than �2m.

As far as inheritance goes, Reeves could introduce a lifetime cap on gifts, which are currently unlimited. In addition, tapering relief could be altered, and the seven-year rule extended to 10.

Taxes on the gambling sector are set to rise, while the government is also understood to be considering a new 'taxi tax' which would apply VAT to all private hire journeys, as well as an 'Airbnb tax'.

A new pay-per-mile tax on drivers of electric vehicles has also been considered, along with an increase in fuel duty.

As far as banks are concerned, the Financial Times reported on Tuesday that Reeves was preparing to spare the sector from a tax raid. According to the FT, the Treasury has asked banks to make public and prominent endorsements of the Budget this week.

Sources told the FT that officials want lenders to praise new policies and show how they will boost lending to first-time buyers and small businesses.

The understanding is that banks should refrain from criticising the government's decisions, one of the sources said.

A separate report from Bloomberg on Tuesday suggested that Reeves will announce a three-year stamp duty holiday for new listings on the London Stock Exchange.

Citing people familiar with the matter, it said the exemption will mean investors won't have to pay the tax on purchasing shares of companies that are newly-listed in the UK, which is currently levied at 0.5%.

Sources said the Treasury had been deliberating over how long to apply the exemption for and had settled on a three-year holiday following a company's flotation.

Emma Wall, chief investment strategist at Hargreaves Lansdown, said such a move would be "a welcome boost for the UK stock market".

"London has been losing out to New York in recent years, as businesses favour the funding and regulatory environment of the NYSE," she said. "But if this Budget rumour proves accurate, it may be the carrot British businesses need to plump for a domestic listing.

"Currently investors have to pay 0.5% stamp duty tax when they buy shares, but this is expected to be waived for new listings for up to three years - though this has not yet been confirmed. This would make buying British more enticing for investors and help redress some businesses' concerns about demand for UK shares.

"If this goes ahead, it would help strengthen the Government's stated position that they are both pro-business and supportive of a growing retail investment culture in the UK."

As regards income tax, there had been expectations the Chancellor would announce a hike, but recent reports suggest the government could instead extend the freeze on the levels at which people start paying income tax and national insurance. This would mean that over time, more people are drawn into paying more tax on their wages and pensions.

"Extending the freeze by another two years to 2030 would raise around �8bn in additional revenue for the Treasury," said Neil Wilson, UK investor strategist at Saxo Markets. "It is one of the few big tax-raising levers the Chancellor has available to her."

As far as savings and investments are concerned, Wilson said lowering the tax-free dividend allowance from �500 per year "may not be practical" but is "not unimaginable".

"More easily, the current marginal dividend rate of tax, ranging from 8.75% to 39.35% based on your earnings, could be brought in line with income tax," he said.

"In a bid to boost investing in equities, a cut in the annual cash ISA allowance from �20,000 to �12,000 is being looked at."

Patrick Munnelly at Tickmill Group said: "When tomorrow's UK Budget is released, markets are likely to focus on several key aspects. One major consideration is the fiscal headroom, where a buffer of less than �15bn in 2029-30 under the main fiscal rule could be seen as underwhelming. Another critical factor is the policy measures themselves. While the total fiscal tightening is expected to be around �30bn, the timing of these measures will be crucial. If tax increases are heavily backloaded, gilt investors might question the credibility of the plan.

"Inflation forecasts will also be under scrutiny. The extent to which cost-of-living policies influence the Bank of England may already be priced in, meaning it could take a significant surprise to move the market. Additionally, attention will turn to whether the OBR overrides the market's Bank Rate curve, particularly if the government's policy package is expected to suppress inflation more than anticipated - though this scenario remains unlikely.

"The government's total cash requirement over the next five years compared to March projections will also be a focal point, though significant changes are not expected. For the remainder of the year, it will be important to assess how much planned gilt sales for 2025-26 increase, with estimates suggesting an additional �10bn.

"Finally, revisions to GDP and productivity assumptions, particularly adverse changes, have been well signalled. However, markets will closely evaluate how policy tightening could further exacerbate economic headwinds. These are some of the primary details that will command investor attention."

On the corporate front, interim results are due from Pets at Home. Shares in the company tumbled on 18 September, after it announced the immediate departure of chief executive Lyssa McGowan and downgraded its full-year profit guidance.

Wednesday November 26

INTERIMS

Cake Box Holdings, Helical, Iomart Group, Pets at Home Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Chicago PMI (US) (14:45)

Continuing Claims (US) (13:30)

Crude Oil Inventories (US) (15:30)

Durable Goods Orders (US) (13:30)

MBA Mortgage Applications (US) (12:00)

New Homes Sales (US) (15:00)

Personal Consumption Expenditures (US) (15:00)

Personal Income (US) (15:00)

Personal Spending (US) (15:00)

FINALS

Auction Technology Group , Impax Asset Management Group

EGMS

NB Distressed Debt Investment Fund Limited

AGMS

Altona Rare Earths, Avation, Celsius Resources Limited (DI), Coral Products, Fidelity Asian Values, Seed Capital Solutions , Seeing Machines Ltd. NPV (DI), Sutton Harbour Group

FINAL DIVIDEND PAYMENT DATE

Hays, Strategic Equity Capital