For private investors the Chancellor’s Budget is mostly good, and we can all drink his health in spirits on which the tax is cut. The other good news is as follows:
– The personal allowance will rise to £11,000 over two years from which all taxpayers will benefit and the threshold for higher rate income tax will also rise.
– There will be a new flexible ISA where you can take money out and then put it back in within the same tax year without losing your ISA allowance. Will this mean you can run it like a current bank account?
– The maximum ISA contribution will be raised to £15,250, making it ever easier to become one of those “ISA millionaires”.
– There will be a new ISA for those saving for a deposit on a house with matched contributions from the Government, although the amounts involved may not help much for those in the South-East.
– Beer and spirits duty is down, and wine duty frozen. Fuel duty is also frozen.
– Paper tax returns will be scrapped, and replaced by on-line filing.
– If the Conservatives win power in the General Election, then the first £1,000 of interest income received will be tax free for basic rate taxpayers. This will take a surprisingly high 95% of savers out of that tax altogether.
– Pensioners will be able to trade in their existing annuities for cash (this is of course in addition to the already announced ability to take other pensions in cash rather than as an annuity).
– There will be encouragement for oil companies, particularly North Sea operators.
The bad news is as follows:
– The lifetime maximum pension allowance will be reduced from £1.25m to £1m. This will save the Treasury a considerable amount.
– Deeds of variation where after your elderly relatives have died you can effectively rewrite their wills to pass on money directly to your offspring (or others) rather than yourself, thus avoiding inheritance tax, are to be reviewed. This is a clever wheeze that the well advised and wealthy have been exploiting more of late.
– Banks continue to be the “whipping boy” of the economy with a rise in the “bank levy” and they will no longer be able to deduct compensation payments from corporation tax calculations.
– Business rates and how they operate are to be reviewed but that does not mean they will be reduced overall.
– The sale of mortgage assets of Northern Rock and Bradford & Bingley will raise £13bn for the Chancellor but will former shareholders or bondholders in those companies benefit even though there is clearly a substantial surplus remaining as was always expected?
The Chancellor is bullish about the prospects for the economy. Unemployment is falling and thus reducing benefits payable, while inflation and interest rates are low thereby helping to reduce the Government’s debts. Therefore it is expected that the Governments borrowing and budget deficit will fall very substantially over the next few years.
In summary a generally positive budget for most private investors, although a few will suffer as a result of the pension cap. Whether the positive aspects will induce the “feel good” factor in the electorate in general sufficient for the Tories to win the General Election outright seems doubtful.