Yes, pensions escaped the tax grab, but it’s no time for complacency

TEN minutes into the Budget and I’d labelled the Chancellor ‘Pothole Phil’. Thanks to his munificence, I may one day be able to cycle the length of my street without pitching headlong over the handlebars as my front wheel ploughs into an 8in chasm.

But, as he wended through 71 minutes of spending pledges and some jokes of questionable taste, it became clear that this Budget was as much about what wasn’t said as what was.

There were no changes to pensions — phew!

So my tax-free lump sum looks safe and higher-rate taxpayers will continue to get 40 pc tax relief on their pension contributions.

But let’s be honest. The financial industry throws up this balloon every year and we must question how often these rumours are generated by their own marketing department in an effort to panic us into parting with a few thousand quid.

Then there’s VAT. I know plenty of self-employed people and freelancers who would have found themselves pulled into the nightmare of dealing with VAT if the threshold for registration had been cut to £43,000 as feared.

Instead, Philip Hammond has frozen the limit at £85,000 — which will drag some people into the net if they increase their turnover.

The key unspoken threat here is that in two years, once we’ve left the EU, this issue could bounce back onto the agenda.

Though whether Mr Hammond will still be in No 11 Downing Street is debateable.

Then, what’s happened to National Insurance (NI) contributions? After his humiliation when he tried to whack the self-employed with increases on Class 4 payments, our Chancellor has gone quiet on the subject.

Nevertheless, NI did have a significant impact on the Budget announcements — even though Pothole Phil failed to mention it. Here’s why. No NI is paid on the first £8,424 we earn this year (rising to £8,632 from April 2019), but then it is charged at 12 pc for employed people and 9 pc for the self-employed, until we start paying higher-rate tax. On earnings above this level, we pay 2 pc.

When the higher rate of tax goes up, so does the amount of earnings that are hit by the 9pc and 12 pc rates.

So, while lifting the higher rate tax threshold from £46,350 to £50,000 has cut the amount of tax paid by higher earners, it has also

increased the amount of NI they pay. He giveth with one hand and taketh with the other. Which brings me to the big winners of the Budget: better-off pensioners. While pensions are taxed, they are not subject to NI, so pensioners with incomes of more than £50,000 a year will be the only people to benefit fully from the headline £860-a-year tax cut.

That’s something which may appeal to Mr Hammond who, turning 63 in December, is closing in on his pension.

I was also pleasantly surprised to hear some good news for smaller to medium-sized shops on business rates.

But, sadly for those who fear the loss of their Debenhams or Marks & Spencer, there’s still no sign of relief for bigger businesses. When will politicians realise that there is no longer much of a premium to being in the High Street — especially if your nearest neighbours are pop-up shops and pound stores?

But where did the Budget leave us investors? Personally, I was reasonably pleased.

The tax cut harked back to the days when Tory Chancellors produced a pleasant surprise or two along with the corny jokes.

Tories should be tax-cutters — it’s in their DNA.

I’m a great believer that individuals know how to spend and invest their own money better than governments do.

There’s been some disappointment that more was not done for savers. I think the biggest is the longer-term cutback in the money National Savings & Investments (NS&I) is being asked to raise — which, inevitably, will lead to lower savings rates.

Savers need a strong NS&I for security and competition.

There were no new savings and investment schemes — but who needs them, honestly? What we investors require is certainty that a Chancellor won’t mess with the arrangement we have — as Hammond did when cutting the amount of tax-free dividends investors could take from £5,000 to £2,000 last year.

The adult Isa limit was frozen at £20,000 a year (something that, again, went unsaid) but, let’s be honest, that’s beyond most people’s saving capacity.

Personally, I would have loved to see a proper increase in the lifetime limit for pensions instead of mere indexing to £1,054,800 already announced. This remains an unfair limit for those who rely on stock market investing for their pension, as opposed to having a final salary scheme.

It punishes good investment and has little to do with how much is invested.

So, overall, it wasn’t a bad day at the office, Phil.

From a domestic point of view, you didn’t do investors any harm and you’ve let us keep a little more of our own money.

But, with Brexit decisions still in limbo, Trump stamping on trade deals willy-nilly and concerns over U.S. stock market valuations, there’s a big wide world we have to worry about. This is no time for complacency.