If the impact on the tax take is any guide, the main winners from the Budget will be basic rate and ‘squeezed middle’ 40 per cent rate taxpayers.
They will benefit from nearly £9bn tax relief over the five-year planning period, through higher personal allowances, an increased higher rate tax threshold and a new allowance for savings income that will take most people’s savings income out of tax.
With 27m people to share in these spoils, it isn’t a ‘bonanza’, but getting bank interest without any deduction of tax will certainly be a very visible change.
The newly hard-pressed oil sector will net over £1bn from new reliefs and there will be a further billion for drivers, alongside beer, cider and spirits drinkers, from the changes to fuel and alcohol duties.
Over £5bn of all this will come from the banks in extra bank levy and from withdrawing tax relief from payments made by banks to settle mis-selling claims (although of course, the profits from the original misselling remain taxable).
This is on top of the changes announced in last year’s Autumn Statement to raise £4bn extra from banks over the planning period. They have, however, been spared the job of collecting tax on depositors’ interest.
Earlier in this parliament, oil companies tended to bear the brunt of changes to finance reductions for the broader range of businesses. Now the banks are stepping, unwillingly, back into the breach.
The other losers are the 4 per cent of people with the biggest pension pots (with the lifetime allowance for tax-protected pensions being reduced again, from £1.25m to £1m – about £2bn extra tax) and tax avoiders and evaders, from whom a range of measures across several taxes will net about £3bn.
Most businesses will probably welcome the announcement of the end of the annual tax return.
However the government will still need to have the means to know things about you that they cannot collect from banks, employers, pension providers and others; how this data will be gathered remains to be seen.
The real reduction in the compliance burden remains to be seen; but at least it may be less of a last-minute rush.
John Cullinane is a tax partner at Deloitte
