Six expert UK budget predictions
By International Adviser, 13 Oct 17
Experts from Old Mutual Wealth and Quilter Cheviot give their budget predictions ahead of 22 November.
Pension tax relief
Jon Greer, head of retirement policy at Old Mutual Wealth says:
“The cost of pension tax relief now totals close to £54bn annually. This includes both income tax relief and employer national insurance exemptions. That is a huge investment in our future prosperity, and we hope the chancellor will recognise the value in helping workers achieve a prosperous retirement.
“Nonetheless, there are still lingering concerns that the Chancellor may chip away at the tax break. David Gauke has offered savers some re-assurance by ruling out ‘fundamental’ reforms to the system, pension taxation really sits with HM Treasury rather than the Department for Work and Pensions.
“Government could further reduce the annual allowance on contributions, perhaps to free up funds to help younger generations. It has already tumbled from £255,000 in 2010, and reducing it again would further restrict contributions.
“A more radical option would be to curb the employer national insurance exemption. The estimated cost is around £15bn a year on latest figures, although this figure should be taken as a broad estimate. For example, it is based on an estimate of how much would be raised if both employer and employee NICs were levied on the employer contribution. Whatever the true cost is it will continue to go up as minimum contribution rates under auto-enrolment increase in 2018 and 2019. Cutting this relief would reduce the cost of tax relief at the expense of business rather than individuals. Although over the long-term some of the cost may be passed on in the form of lower pay.
“Higher rate tax threshold to £50,000 and personal allowance to £12,500
“The Conservatives committed in their manifesto to increase the personal allowance – the amount we can earn without paying any income tax at all – to £12,500 and raise the earnings threshold for higher rate tax of 40% to £50,000.
“The latter is a particularly notable increase and would cut £1,000 a year from the tax bill of someone on a £50,000 salary. But with relatively little wiggle-room in this Budget, and the opportunity to phase-in increases between now and 2020, the chancellor may leave the existing thresholds untouched on this occasion.”
Tags: Budget | Old Mutual | Quilter Cheviot
