This is going to be a highly political Budget, taking place only a few weeks before a General Election, but also at a time when the UK economy remains in a very fragile state.

Here are our personal finance predictions for the Budget.

1 – Capital Gains Tax

The gap between capital gains tax at 18% and the new highest rate of income tax at 50% is too wide, opening up the risk that taxpayers will look for ways to avoid income tax by shifting their strategies to capital gains. We would not be surprised to see CGT increased to 25% or 30% in this Budget.

2 – Inheritance tax

With politics so focused on class in recent months, there is a gulf between the parties when it comes to inheritance tax. The Conservatives still plan to increase the nil rate band to £1,000,000, but Labour are more likely to tighten this tax. The nil rate band has already been frozen for 2010/11, so investment growth will result in higher IHT bills for many estates.

3 – Pension commencement lump sum

It is fair to say that many investors have been panicking in recent weeks amidst speculation that the Budget will attack the tax-free cash benefits available from pension plans. This is particularly true for investors who are entitled to greater than 25% of their fund or very large tax-free cash payments.

There is a rumour in pension circles before just about every Budget that the Pension Commencement Lump Sum will be targeted. We hope that it is simply a rumour with no foundation once again this time.

4 – Simplifying pension tax relief

The anti-forestalling measures introduced last April, and updated twice since, are very complex and probably failing in their original goal to prevent higher earners from getting excessive amounts of higher rate income tax relief on their pension contributions. We hope to see these measures radically simplified in the Budget, perhaps with a reduction in the annual allowance on tax relieved pension contributions to a more sensible level such as £50,000.

5 – VAT on hold at 17.5%

The UK continues to have one of the lowest rate of VAT in the European Union, but we do not think the Chancellor will be announcing an increase to 20% as was previously predicted. Increasing VAT now would be a vote loser and would also push at price inflation, making the current spike look unmanageable and possibly influencing monetary policy at a time when the economy cannot afford it.

6 – Something for savers

With the Budget so close to a General Election, it would be remiss of the Chancellor not to offer something to savers. This group of voters have been suffering from historically low interest rates for over a year now, and with the recent spike in price inflation have seen the real value of their savings eroded. This gift to savers might take the form of a higher cash ISA allowance.

Whilst it would be foolish to make important financial decisions today based on any Budget predictions, it is important to be aware of the possibilities and understand how they might impact upon your financial planning.

There is every chance that any Budget changes will be changed again or reversed entirely by a new Government. It will also be interesting to see just how detailed the subsequent Finance Bill looks after the Budget, with such a short period of time to get this through Parliament before it is dissolved.

Despite 31% of Britons predicting there will be substantial tax rises after the General Election, 86% admit to doing nothing to reduce their tax liabilities.

The biggest waste of tax uncovered by the survey was Tax Credits, with nearly £4 billion wasted each year.

This was closely followed by Inheritance Tax where people are wasting a total of nearly £2bn of unnecessary tax payments a year.

The good news is that tax wastage appears to be on the decline.

This year, the total amount of tax set to be wasted by individuals was done 9%, after reaching a £10bn peak last year. People living in Greater London and the South East are wasting the most tax – over £2.6 billion in total.

Even with a rising tax burden, there are plenty of ways in which you can organise your financial planning to ensure you do not waste available tax allowances and exemptions. Speak to an independent financial adviser today to ensure you are not including your own money within this £9bn of wasted tax in 2010.

Unfortunately some sales organisations seek to “hijack” this label in light of the fact that the title “Financial Adviser” has become something of a damaged brand in recent years.

A good example of this comes from the banking sector where Natwest has recently launched an advertising campaign around the theme of taking advice from their Financial Planning Managers.

They are of course perfectly entitled to do this but we would suggest that if you engage with them you simply ask them one question;

“As a Financial Planning Manager are you a Chartered Financial Planner or Certified Financial Planner?”

If the answer is neither then we suggest you go and talk to someone with the proper Financial Planning qualification.

This means that anyone leaving their 2009/10 ISA contributions to the last minute need to be aware of what that last minute actually is!

It makes real sense to arrange your financial plans well ahead of any tax year end deadline and realistically this time round that needs to be before the end of this month.

A lot has already been written on the subject of the ISA allowance but those who have been paying regular monthly contributions to achieve the maximum may want to consider making a top-up to achieve the £10,200 limit (for those over 50 years old by the end of the tax year). If that is something you want to do then make sure you contact your financial adviser now.

Also be aware that product providers (and advisers!) are under additional pressure this year as a result of the minimum pension benefit age rule change.

From 6th April 2010, the earliest age at which you can take your pension benefits is 55. This has resulted in a flurry of last minute enquiries from investors who are over 50 but under 55 asking if they can access their tax-free cash before the benefit rules change.

Keep in mind that it can take several weeks to process a request of this nature, particularly if it means having to move a pension fund to a new provider first. If you were hoping to do this but have not already taken advice, chances are you have now missed your opportunity are realistically pension providers are unable to process these requests in time.

Ms Barker steps down from the Committee on 31st May 2010, but before leaving hopes that her experiences might inform the MPC over the “difficult” years immediately ahead

An important warning delivered within the speech was that expanding Quantitative Easing (QE) from the current level of £200bn may do very little to boost the UK economy.

Whilst QE has played an important role to date, Ms Barker says that further spending would do little to boost confidence any further.

It will be interesting to see how the MPC decides to proceed with any extension to QE this year, particularly if economic recovery stalls or remains as anaemic as the revised GDP figures for the final quarter of last year suggest.

Ms Barker also admitted that the MPC and others had misjudged the state of the economy before mid-2007 when the financial crisis started. This was an important speech that could provide clues to how monetary policy might be deployed in the future.

New research from Fidelity International has found that 93% of investors still do not fully understand the benefits of an ISA.

Just one in twenty people admitted to understanding the tax advantages of a stocks and shares ISA. More people could explain the tax treatment of a cash ISA, with one in nine investors fully understanding these.

Worryingly, 7% of investors thought there were no tax advantages associated with investing money within an ISA. Fidelity have described the three main reasons why they think there is this level of confusion.

Firstly, investors fail to separate the ISA tax wrapper from the underlying investment. The ISA is not the investment but a ‘tax shield’ which protects the investments you select from tax charges.

This means that using an ISA does not result in taking more risk with your money. It is simply a tax wrapper to reduce the impact of tax charges on your cash or investments.

Secondly, there is possible confusion over phrases like ‘tax advantageous’ and ‘tax efficient’. This is because the Government stopped paying the additional tax credit for stocks & shares ISAs in 2004. Investment returns within an ISA are free of all personal UK tax, with the tax you save compared to a non-ISA investment depending on the type of underlying investment.

Finally, there is often confusion between a cash ISA and investment ISA, as they tend to operate in a different way. With a cash ISA you can only access deposit accounts that have been created as cash ISA accounts. Recently it has been the case that non-ISA deposit accounts are offering a more competitive net interest rate than the gross interest available on the cash ISA alternative.

With investment funds, they tend to be accessible either inside or outside of an ISA, the main difference being the tax treatment.

ISAs remain an important part of any overall investment strategy, particularly for retirement planning as pensions come increasingly under attack by the Government. They offer a degree of flexibility not available within pensions and make investing money simpler, particularly from an administration perspective.

The FTSE 100 closed at its highest level on Friday since the collapse of Lehman Brothers in September 2008. It also had its strongest week of performance since last July.

Over a year the FTSE 100 has risen from 3,529.90 (2,069.86 points or 58.64%).

£1 is currently worth $1.51210 US or €1.11070 Euros.

Brent Crude Oil Future is currently priced at $80.11/barrel. Gold is $1,135.00/ounce and Silver is $17.25/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 3.5% for the year to January 2010.

From 6th April 2010, both men and women will need to make 30 years of National Insurance (NI) contributions to be eligible for the full state pension.

As a result of the changes, a woman who has fully paid up NI contributions and turns 60 on 6th April would be entitled to a full State pension. A woman born a day earlier who has worked just as long would get three quarters of this – around £75 a week in 2010-11.

This could mean women retiring before the 6th April 2010 cut off could miss out on hundreds of pounds over the next decade.

Guidelines published within the Charges for Residential Accommodation Guidance (CRAG) currently mean that the value of Investment Bonds are disregarded as a capital asset in the financial assessment for residential accommodation.

This is because they are treated as a life assurance policy rather than a capital investment, due to their structure.

The consultation asks the following question:

“Do you think these bonds should be taken into account in the financial assessment?”

It goes on to suggest that the surrender value of Investment Bonds should be taken into account if they are entered into after the date any change to regulations come into force.

You can view the consultation paper, which is only twelve pages long, here.

The closing date for responses to this consultation is 23rd April 2010, so we expect to see a policy statement from the Department of Health in the early summer.

Additionally, the personal allowance is gradually reduced for those earning more than £100,000 and completely disappears for those earning £112,950 or more.

Is it time to reconsider that old chestnut “the salary sacrifice technique”?

By sacrificing some salary in return for a pension contribution, significant tax and National Insurance savings can be made by both Employees and Employers. This will no doubt appeal to owner Directors as well as high earners who have some control over their remuneration strategy.

This is an excellent formula for building pension benefits for later in life.

It might not suit everyone and your own individual goals and objectives should be considered but this is definitely a topic for the new tax year well worth a new discussion with your accountant or financial adviser.