Chancellor George Osborne has certainly done a good job in following-up the work of Gordon Brown, with a somewhat merciless approach totaxation. The biggest question on the lips of so many now being – just how far will he go with tax relief?
When Brown called Number 11 his home, he didn’t exactly curry a great deal of favour by deciding to scoop up an annual £10 billion from UK. In fact he pretty much made himself public enemy number one for a while, but when compared to what’s going down right now with his successor, the previous picture doesn’t look nearly as bad as it did at the time.
UK pension savers were hit hard…some VERY hard…by Brown’s decision to get rid of tax relief on dividends. Right now though, Mr. Osbourne appears to have declared war on high earners, who’ve not only been slapped with rather eye-watering reforms but are also expecting bigger, perhaps even worse changes come the 2016 Budget.
By comparison, Brown’s time in Number 11 may end up being looked at as something of a time-of-plenty…not that you’d have known it at the time, of course. Back then, up to 50% of contributions were eligible for full tax relief, with maximum (justifiable) annual contributions hitting as high as £255,000 per person. And if this wasn’t mind-blowing enough, the pension savings lifetime allowance hit a record high of £1.8 million, which seems almost impossible to believe compared to the state of play today.
With Mr. Osbourne at the helm, it’s now a case of pension savings lifetime allowances dropping to just £1 million, while total annual allowances have plummeted to just £40,000. For anyone who didn’t think that the new Chancellor would be as vicious as Gordon, evidence suggests quite to the contrary.
What we don’t yet know however is whether tax relief on contributions will be removed altogether remains to be seen, though the Gov’s on-going strategy to encourage the UK public to pay more into pensions means it could swing either way.
Speaking of swinging either way, the Conservatives are clearly struggling to both balance and juggle competing priorities, which it’s clear aren’t going to go away without strong and decisive action. Encouraging members of the public to take care of their own savings and financial futures is something the Tori party has traditionally stood by and continues to do so. But at the same time, debt and deficit are no doubt playing on the mind of Mr. Osbourne, along with whether taxpayers get good enough value from the £50 billion annual upfront cost of pensions to the Treasury.
It’s going to be an interesting few years to say the least as Mr. Osbourne has personally promised that the budget will be balanced by 2019/2020. But at the same time, the promise of tax increases being shelved for the time being combined with budgets for the NHS and other key expenses already being outlined means he’s going to have a very difficult job in making it happen.