THE CHANCELLOR made several changes to personal tax as he sought to reduce reliance on benefits among the country’s poorest, while maintaining the support of grassroots Conservatives and attracting investors to the UK.
Chief among the changes was an increase to the higher-rate threshold, which will see the 40% rate threshold shift up 1% in 2014/15 and 2015/16, while, at the other end of the spectrum, the personal allowance was increased to £9,440.
The nil-rate band of inheritance tax was also raised by a percentage point, while income tax unlimited reliefs were capped at £50,000 or 25% of a person’s income – whichever is greater. Charitable giving, though, is exempt from the move.
As predicted, the annual maximum tax-free pension contribution was dropped from £50,000 to £40,000, along with the lifetime allowance for pension savings, which was also dropped from £1.5m to £1.25m.
Another well-trailed and controversial change was the implementation of employee shareholder contracts, which will see employees granted shares worth between £2,000 and £50,000 in exchange for basic employment rights. Those shares will be exempt from capital gains tax and may also see income tax and national insurance contribution drops.
PKF head of private clients Andrew Penman was disappointed with the decision to drop the maximum pension contributions.
He said: “”If I put £100 into my pension today, what will I get out on retirement? That question is hard enough to answer anyway, without the Treasury moving the goalposts on a regular basis.”
Following recent issues with HMRC’s personal tax computation software, Brian Palmer of the AAT questions whether the government’s implementation timeframe for Making Tax Digital is realistic
The first phase of a process to restrict the amount of tax relief for residential landlords to the basic rate of tax will enter into force on April 6
Richard Le Tocq, head of Locate Guernsey, discusses the chancellor’s approach to high net worth individuals, and why relocation is increasingly attractive to HNWIs
The firm says that the U-turn 'does not alter the need for a fundamental review of the way we tax work' and that the current tax system is in need of reform