2011 Budget Special Newsletter
Two cheers for Chancellor Osborne! He has done two things right anyway. One is to reduce the tax rule book by 100 pages which Gordon Brown was incapable of doing and the second thing is giving support for successful industries and it is obviously far more important than supporting failure which is what has happened in the past. I suppose as a corollary one has to also be grateful that he has reduced corporation tax.
I am a great believer in the law of diminishing returns as I am always going on about and asking for less tax usually means there is more in the Treasury.
Unfortunately that’s where it all ends as there have been some nasty sneaky things put in just
as Labour used to do under the back door as it was. For example winter fuel allowance has been cut. Another thing which is not directly related to the Budget is the fact that this wonderful new £150 per week pension which is going to be payable in about 4 years’ time will not apply to existing pensioners. I would have thought that was quite an incentive for much of the country to vote Labour if they don’t already.
Also nothing has been done about increasing pensions for people living abroad which every party when in opposition has promised to do but has never done.
As for the new rules on Pensions they are so fiendishly complicated that I have never seen anything like it myself and remember that I have got two advanced pension exams behind me and I am still struggling with it.
The main thing is the pension input period which admittedly has been in place for some time but has started biting now for people on high incomes and making large rates of pension contribution. In fact we are now in a position where in certain cases if a company is making a contribution to employee scheme they may or may not get corporation tax relief depending on the feelings of their local Inspector of Taxes. It beggars belief.
The other really nasty thing which has just crept into the Budget, except that it was done as an
ancillary is that if anybody is in Pension Fund Withdrawal also known as Income Drawdown that if they die the rate of tax applicable to the fund that is left to heirs will now be 55% instead of 35%.
Having said that, that would be efficacious for people who die after the age of 75 and that of course is the spin that the Government is putting on it.
However, this is something that I think Ed Balls would only have dreamt of; and to think that I used to think that he was dangerous!
I never cease to be amazed about the fiddling about with the odd penny here on fuel. What is needed is a 50p reduction at least. Interestingly enough in Italy, which actually has fuel prices remarkably similar to the UK, diesel is much cheaper whereas in this country it is more expensive. I note the argument is that it costs more to refine but as it feeds through to inflation via transport costs it seems to be logical to have it less. But whenever has a politician been logical!
One interesting thing is the Government is working towards the integration of the Income Tax and National Insurance systems to make it more user friendly. I think it is going to be quite complicated because of retired people but nevertheless national insurance has largely been an income tax particularly class 4 which is levied on self-employed people below the age of 65 and can be 8%. This means that the highest rate of tax for someone aged say 60 is effectively 58%.
As ever some of these matters are so complicated that it is worth seeking our advice.