By ADRIAN LOWCOCK 24/03/2010
Apart from a welcome decision to increase the annual ISA allowance in line with inflation, this was a highly political budget designed to highlight differences with the Opposition without unnerving markets.
Tax Changes
The Chancellor confirmed the introduction of the new 50% rate of income tax for those earning more than £150,000 and restrictions to the personal allowance available to those earning over £100,000 from 6th April 2010. The Treasury confirmed that the new limits on tax relief on pension contributions for those earning over £130,000 will come into effect from 6th April 2011. They downplayed the complexity of designing the new rules, particularly in respect of Defined Benefit Pension Schemes and look set to legislate in the short term. Inheritance Tax thresholds will be frozen at £325,000 for the next 4 years and a new 5% stamp duty applied to £1 million plus property purchases.
Some Good News on ISA Allowances
The ISA allowance will increase in line with inflation from April 2011. The rise will be based on September’s RPI figure (rounded to the nearest £120). Whilst not an overly generous increase for the prudent saver, the allowance will at least be safeguarded in real terms.
The Next Budget
It will not be until the Summer or Autumn that we will see the Government (whoever is in power) specify in detail how it will address the difficult fiscal challenges the UK faces. Despite the Chancellor announcing that he has ‘no plans’ for tax increases at present, it seems highly unlikely that public sector spending reductions alone will be sufficient to cut the deficit. The Institute for Fiscal Studies (an independent think-tank) highlighted in its recent Green Budget the alternatives available to The Treasury, to raise £15 billion of additional income. Options range from an increase in the rate of VAT to 21%, new income tax rates of 23% and 43%, reductions in the threshold for higher rate tax, further restrictions on pensions relief through to the alignment of the capital gains tax rate with income tax.
We strongly recommend that investors make the most of the opportunities available to protect their investments from the burden of additional tax now.
If you have any questions or require any help, please call one of our Advisers on 020 7189 9999.