PER­SONAL AC­COUNT

The Daily Telegraph - Your Money - - MONEY - Marc Sid­well

Watch out – the Trea­sury plans to rake in bil­lions more from the death tax

Don’t say I didn’t warn you. Philip Ham­mond’s pre-Brexit Bud­get was pre­dictably fire­work­free. Even the sur­prise cut to in­come tax through the in­creased per­sonal al­lowance isn’t all that sparkling when you fac­tor in the ac­com­pa­ny­ing rise to Na­tional In­sur­ance con­tri­bu­tions (NICs) tucked away by Mr Ham­mond in the small print (see page 4).

But we are used to Bud­gets that hide the devil in the de­tail. This time around, rather more trou­bling was what wasn’t said at all – in par­tic­u­lar, the Chan­cel­lor’s si­lence on pen­sion relief and in­her­i­tance tax re­form.

De­spite be­ing widely an­tic­i­pated, cuts to tax relief on pen­sion con­tri­bu­tions failed to ma­te­ri­alise. That’s good news for now. But there was no re­as­sur­ance that this will last. Since this was also a Bud­get that com­mit­ted to huge spend­ing in­creases and the “end of aus­ter­ity”, it would be fool­hardy to trust that cur­rent pen­sions relief will es­cape at­ten­tion for long.

Af­ter Mr Ham­mond’s high­spend­ing Bud­get, the In­sti­tute for Fis­cal Stud­ies, a think tank, warned that tax rises re­mained “in­evitable” and that there was a one in three chance that the pub­lic fi­nances would “de­te­ri­o­rate sig­nif­i­cantly” next year. In that con­text, pen­sion tax relief con­tin­ues to be a big, red, flash­ing tar­get just waiting to be hit. Po­lit­i­cal cal­cu­la­tion may ex­tend the stay of ex­e­cu­tion a while longer, but it is pru­dent to make use of the gen­er­ous pen­sion re­liefs while you can.

Wealthy pen­sion­ers were also the only group to get the full value of the in­come tax cut thanks to their ex­emp­tion from NICs. Don’t be sur­prised if pres­sure grows for end­ing that tax break as well.

In­her­i­tance tax is an even more press­ing topic. A re­view from the Of­fice of Tax Sim­pli­fi­ca­tion on this hated levy is due to re­port be­fore the end of the year. And there is plenty of room for im­prove­ment. The thresh­old at which IHT must be paid has been frozen at £325,000 since 2009, al­most 10 years ago. But at the same time there have been ru­mours of pos­si­ble cuts to valu­able re­liefs, no­tably the abil­ity to pass on shares quoted on the Aim mar­ket free of IHT.

This week’s Bud­get doc­u­ments of­fered lit­tle grounds for hope. The Trea­sury is al­ready rub­bing its hands in an­tic­i­pa­tion of year af­ter year of bumper IHT re­ceipts. The 2017-18 fig­ure was re­leased in April and it was record break­ing. Up £400m on the pre­vi­ous year, it weighed in at an as­ton­ish­ing £5.2bn. Now the pro­jec­tions in the Bud­get for 2018-19 ex­pect the IHT take to soar again, to £5.5bn. The Trea­sury then ex­pects re­ceipts to grow by be­tween 3.5pc and 6pc a year for at least the next five years, reach­ing £6.9bn by 2023-24: an in­crease of a third on the record re­ceipts of 2017-18.

We shall soon know what re­forms are rec­om­mended to sim­plify IHT, but as the Chan­cel­lor has used this Bud­get to open wide the pub­lic purse strings, don’t count on fewer of us pay­ing the death tax any time soon.

The Chan­cel­lor promised to cut in­come tax – but there was a catch

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.