Chancellor could target pensions in statement

Opinion: Budget options considered

With the chancellor’s Budget statement taking place this week, what will be announced and put under the spotlight?

Although the Office for Budget Responsibility reported that central government borrowing had fallen by £2.5billion for the 201718 fiscal year, it is likely that the deficit will increase relative to last year.

Here are some of our predictions for what might be included in the announcements on Budget day.

Pensions – this is usually a hot topic on Budget day, when the chancellor rarely misses an opportunity to review the system and make some changes.

Having already reduced the Money Purchase Annual Allowance in last year’s Autumn Statement, there is a good chance we will see another change in either:

• The amount you can save into a pension over the course of your life, or;

• The amount you can save every year.

Tax relief may also be under the microscope as the current regime costs the treasury up to £45billion a year.

We could, therefore, see a reduction in the amount high earners can claim from the current 45% to perhaps 30%, or even 20%, giving a potential saving of £13billion a year.

There has been some suggestion that we could see a reduction in the taxfree lump sum you can take from 25% to 20%, however, this will be unpopular with voters and we cannot see this happening.

Other tax-efficient investments – given the reductions in the amount you can save into pensions, there are more people now looking at alternate invest- ment vehicles such as the Enterprise Investment Scheme (EIS) or Venture Capital Trusts ( VCTs), which give 30% tax relief on investment.

HM Treasury has been conducting a review on this (the Patient Capital Review), which is due to report back to the government just before Budget day.

It is highly likely that action will be taken to ensure that tax relief is given only where it is genuinely driving investment in the small, innovative companies that it is aimed at.

We could, therefore, see a restriction in the type of companies eligible for this relief, or a reduction in the amount of tax relief available.

Brexit – there is pressure on the chancellor to start planning for a “no deal” Brexit, so it may be likely that we will see funds allocated to start preparing for this scenario.

Self-employed tax chang-

“There is a good chance we will see another change”

es – having already tried to make changes to the selfemployed tax system last November, we could see the chancellor returning to this area since there are no longer any restrictions from the previous manifesto.

Diesel car scrappage scheme – we could see details of how the government plans to implement its proposed scheme for getting the older, most polluting diesel vehicles off the road.

The Scottish Government now has control over income tax and stamp duty (land and buildings transaction tax) so other changes the chancellor may make will be less relevant to us.

We never know what the Budget will bring until the announcements on the day, however, my predictions above may be areas that are likely to be put under the spotlight.

Can anything be done about it? If you were planning to make a pension contribution prior to the end of the tax year, it may be prudent to bring that forward.

If so, please speak to your local Johnston Carmichael Wealth financial planner for further information.

ADVICE: Craig Hendry, managing director at Johnston Carmichael Wealth