Investments  

Chancellor sets date for March budget

Chancellor sets date for March budget

Chancellor Sajid Javid will deliver his first budget on March 11 he has confirmed.

Alongside increased investment in infrastructure the government is expected to look at pension tax, particularly the annual allowance taper, which has dominated headlines in relation to NHS senior clinicians.

A statement released by the Treasury today (January 7) said the Budget would prioritise the environment, and boost spending on public services and tackle the cost of living.

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Measures will include investing in new hospitals, training new police officers, funding vocational education and a cash increase to the National Living Wage.

The independent watchdog the Office for Budget Responsibility (OBR) forecast the government would have £5bn of cash to spend above the spending commitments it announced last October.

Since then, as part of the Conservative’s election manifesto, the party committed to scrapping its previously announced plans to cut the rate of corporation tax to 17 per cent, which is expected free up £6bn for extra spending. 

Corporation tax was 28 per cent in 2010, when the party came to office, and is currently 19 per cent. 

Tom McPhail, head of policy at Hargreaves Lansdown, said addressing the annual allowance taper was likely to be one of the biggest challenges the chancellor will face. 

Introduced in 2016, the tapered annual allowance gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

The taper means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

He said: “Anyone earning in excess of £150,000 a year has their pension contribution annual allowance reduced below £40,000.

"Once their income reaches £210,000, the annual allowance drops to £10,000 a year. For some high earners and in particular, members of defined benefits schemes, this can result in them inadvertently incurring a tax charge.

"This has led to a situation where some key workers, most notably doctors in the NHS scheme, have chosen to turn down work and overtime, rather than risking a retrospective pension tax charge.

"In its manifesto, the Conservative Party promised a review of the problem ‘within the first 30 days’ (so actually by next week, in theory).

"This is not an easy one to fix without making the pension system even more complicated than it already is. The Treasury could simply scrap the taper but that would then increase the already substantial amount of tax relief enjoyed by higher earners.”

Former pensions minister Steve Webb, who is now head of policy at Royal London, said: “If the budget is on 11th March, that leaves very little time to implement major structural reform on pension tax relief - eg scrapping the taper - by 6th April.  Makes a Treasury tweak (eg raising the £150k/£110k thresholds) more likely.” 

Sajid Javid said in the Treasury statement: "People across the country have told us that they want change. We’ve listened and will now deliver.