The financial press has not been so excited since George Osborne magically invented Pension Freedom. The number of calls we get have tripled with the fear factor!
Every economist, accountant, financial adviser and their dog, are in a frenzy of activity trying to second guess the machinations of the Chancellor, Treasury, Institute of Fiscal Studies (IFS), Office of Budget Responsibility (OBR).
We all know that there’s a gigantic financial black hole to fill in the finances and every Oxbridge maths double 1st will have been roped in to back test all the theories before Rachael Reeves launches them at us like a gatling gun on October 30th.
What is worrying is the old adage of ‘if you put ten economists in a room to solve a problem, they all come out with a different answer’. Which rather suggests anything could happen given that no stone will be left unturned in the quest to find this 22 billion more each year or was it 35 billion and how much more will it be next month?
Let’s look at the shopping list. Tax & National Insurance, Capital Gains Tax, Pension Reforms, Fuel Duty, VAT, Corporation Tax, Cigarettes & Alcohol, Windfall tax on Energy Company’s, Inheritance Tax, Stamp Duty, Mug the Pensioners, Non-Dom’s, Single Persons Council Tax Discount. The further you look the less the returns, but you also have to look at the cuts which effectively achieve the same end result and that’s ugly.
The highlighted areas above gets the job done but in what proportion is difficult to quantify. The rest of it is just like rearranging the deck chairs on the Titanic. Equalising Capital Gains tax with Income Tax could raise 16 billion each year but the move might be too drastic and you have to be aware of the law of unintended consequences, and the whole thing could destabilise a fragile economy. Remember Kwasi Kwarteng, how could you not?
Pension reform is definitely on the cards and simplifying the tax relief on contributions to one level is an easy target and would raise a significant sum. Bringing pensions into your estate for IHT is another easy earner as would abolishing the Residential IHT relief.
How does this affect you? If you really want to find out give us a call and come and see us.
Rachael Reeve will definitely make a name for herself in the history of budget reforms, but will it be for the right reasons? We’ll soon find out! Don’t forget she wasn’t the UK junior chess champion for nothing so is able to look several moves further ahead than most!
Philip Vaughan is a Director at Abacus Assurance Financial Services Ltd Porthcawl 01656 772222
www.abacusassurance.co.uk philip@abacusassurance.com pippa@abacusassurance.com