Today saw the Chancellor of the Exchequer, Jeremy Hunt, deliver his Spring Budget.
The Chancellor is basing this Government’s economic strategy on the four ‘E’ pillars of Enterprise, Education, Employment and Everywhere. This is in addition to progressing toward this Government’s longer term ambition for the UK to have “the most competitive tax regime of any major country”.
With the UK tax burden at a post-war high, and growing internal pressure within his own party to cut taxes, the Chancellor of the day had a difficult balancing act.
A summary of some of the key announcements/points for individuals are below:
- Pensions – abolition of the lifetime allowance
The removal of the current £1.073 million lifetime allowance (subject to any relevant elections) for pension savings. Previously, exceeding this limit on the total size of your pension fund would result in punitive tax charges. However, the tax free lump sum that can be drawn down on retirement is frozen at its current amount of £268,275 and will be frozen thereafter.
- Pensions annual allowance (AA) to £60,000
An increase from the current £40,000 amount which can be contributed to a pension tax free in any year. In addition, the income threshold before tapering AA has been increased to £260,000, with tapering stopping at £10,000.
- Continuing rate freezes
The Government will maintain the previously announced freezes to the current rates of personal taxation. The impact of this, in a period of high inflation, is an increase in the overall burden of taxation for many individuals as they are dragged into the tax net or higher rate bands.
- Recording of cryptoasset disposals
From the 2024/25 tax year, individuals will need to separately record cryptoasset gains/losses within their self-assessment.
In addition, there were some additional points relating to tax dispute issues:
A. Promoters of tax avoidance schemes (POTAS)
A consultation process will begin on criminal sanctions for promoters of tax avoidance schemes who persist in promoting schemes after they have been warned to stop.
B. Increase in the maximum criminal sentence for tax evasion
The Government will look to increase the maximum sentence for those found guilty of tax evasion from 7 to 14 years.
Sean Bannister, Head of Tax, said the following after the Chancellor’s announcement, “some positives as it relates to the expectations on inflation, noting that this was a policy aim which was already predicted to be met prior to its announcement, and the OBR’s forecast that a recession is likely to be avoided this year. The one surprise in today’s announcements was the abolition of the lifetime allowance for pension contributions. The reasoning given for this change was to encourage continuing employment amongst the over 50s. Overall this appears to be a reactive series of policy announcements, focused on the short, rather than the longer term: a preparatory budget with a view to future headline tax cuts in the pre-election budget”.
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