Posted on: 18th February 2020
With last week’s rather surprising change in Number 11 Downing Street, we begin to wonder; when will we see a budget that has already been three months delayed and, given the possible power shift from the Treasury to Number 10, what could be in the 2020 budget?
With a new Chancellor and a new reality of the first non-EU budget in over forty years, the budget could be far-reaching, dynamic and a foundation for the first majority government in a decade. However, we shall focus on theand tax aspects that could be included.
I do not recall a budget wherehave not been a topic of rampant rumour and speculation. So, let’s dig deeper into where we can see movement.
Higher Rate Tax Relief
It has been reported by those in the financial press that higher rate tax relief could be effectively ‘scrapped’ by setting tax relief at 20% for pension contributions across the board. This change could potentially lead to a double taxation effect as higher rate taxpayers are paying 20% tax on their contributions, then being taxed up to 40% when it is drawn from their pension.
The NHS pension crisis has shown the public and government what can happen when changes to pension rules are not effectively communicated or have unintended consequences on unsuspecting savers. The Government will have to weigh up whether tinkering with a £10bn cost or risk starting another pensions crisis.
The idea of a central place for all to track and trace their pensions from their personal pensions to old employer scheme is not new news. 2016 saw The Treasury promise a Pensions Dashboard by 2019, then the Pensions Bill which would have legislated for it was put on very cold ice by the general election so now we wait to see when the Pensions Bill resurfaces.
The NHS Pensions Crisis which saw doctors being unknowingly penalised due to the Tapered Annual Allowance could see some movement on the range of allowances that are attached to pensions. The BMA has been pushing for a more fundamental review of the allowance system as Mr Sharma, Chair of the BMA Pensions committee, claims that is wholly unsuitable for defined benefit schemes.
In October, the former chancellor hinted at reforming Inheritance Tax as he said at a fringe event at the Conservative Conference;
“You pay taxes already through work or through investments and your capital gains in other taxes, there is a real issue with then asking them to, on that income, to pay taxes all over again. Sensible changes have already been made but it’s something that’s on my mind”
Further, a cross-party group of MPs has called for the 40% tax to be reduced to 10% with a number of tax-free allowances being culled to pay for it. They would also want to limit cash gifts to £30,000 over a lifetime to stop ‘rich’ estates avoiding tax.
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