Budget predictions: where will George’s tax axe fall?

Budget predictions: where will George’s tax axe fall?

Today (16 March) the chancellor will step up to the despatch box and deliver his annual economic assessment and plan for the nation’s finances, but what surprises does this Budget have in store?

A variety of industry experts have given their views on what is likely to be inside George Osborne’s red briefcase:

A capital gains tax raid

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With pensions tax relief off the table for the time being, the Treasury will be looking at other tax takes to help chip away at the UK’s stubborn deficit.

Even at what are considered some of the most beneficial rates for investors, CGT still provided a tax receipt of almost £5.5bn in 2013 to 2014.

David Smith, director of financial planning at Tilney Bestinvest, pointed out just a 2 per cent increase from the existing 18 per cent for basic rate taxpayers and 28 per cent for higher and additional rate taxpayers, could pocket the exchequer an extra £100m a year.

“Such a move could be extremely lucrative for the chancellor, especially as many buy-to-letters are looking to sell-up in advance of the soon to be imposed stamp duty hike.

“To soften the blow, the CGT allowance (the amount up to which an individual can ‘gain’ without being subject to tax) could be increased, which would appease the masses, but to those with assets of significant worth, family assets held for a number of years or for those with second properties, it could be devastating,” he added.

The Royal Institution of Chartered Surveyors has already called on Mr Osborne to help ‘generation rent’ own their current properties through the reform of CGT and they’ve been on the money about these things before.

Simplifying the annual or lifetime allowance

Other non-pensions tax relief options come in the form of the complex system of annual and lifetime allowances, which already face changes from April that will hit 2 per cent of taxpayers hard by 2019.

Chris Noon, partner at Hymans Robertson, explained this figure translates to between 600,000 and 700,000 people earning £90,000 a year and sometimes less being affected.

Currently individuals can take advantage of any unused pension saving annual allowance from the previous three tax years, known as ‘carry forward’, with the government expected to save £1.18bn by 2019 to 2020 from the April change.

But some think the chancellor could go even further today.

“There is always the risk that the chancellor could scrap carry forward,” warned Mr Noon. “If this happens, the government will save even more and the pain will be felt even more acutely and much sooner.

In terms of simplification, he suggested implementing a capped rate of tax relief set at 40 per cent, to maintain an incentive to save.

“We could then scrap the complex system of annual and lifetime allowances and the chancellor would then have the lever of changing the rate of relief if he was keen to cut the cost of providing it in the future,” added Mr Noon.