Beat the Chan­cel­lor’s raid on your wal­let

The Daily Telegraph - Your Money - - MONEY -

As Philip Ham­mond, the Chan­cel­lor, adds the fi­nal touches to his Bud­get state­ment, mil­lions of peo­ple are wait­ing to dis­cover whether they will be given a tax break or forced to hand over more of their money to the Gov­ern­ment.

Mr Ham­mond will present his third Bud­get to Par­lia­ment on Mon­day, the last be­fore Bri­tain leaves the Euro­pean Union in March 2019. While the Chan­cel­lor is not known for sur­prises, Mr Ham­mond may be tempted to pull some rab­bits out of the hat to help both his party and the wider econ­omy get through a tur­bu­lent pe­riod.

So what can tax­pay­ers do to pro­tect them­selves against changes to rules on tax, prop­erty and pen­sions?

Stamp duty rises

Theresa May has al­ready an­nounced that over­seas buy­ers who are not tax res­i­dents in Bri­tain will face ex­tra stamp duty charges. It is un­der­stood that the ad­di­tional stamp duty will be in the form of a 3 per­cent­age point sur­charge, sim­i­lar to the one al­ready levied on land­lords and buy­ers of sec­ond homes.

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Like­li­hood How to beat any changes

for­eign buy­ers can bring for­ward pur­chases but for first-time buy­ers in Lon­don, where prices are fall­ing, it may be worth wait­ing to see if this change brings down prices fur­ther.

In­come tax cut aban­doned

As the big­gest source of rev­enue for the Ex­che­quer, even small tweaks to in­come tax can raise bil­lions of pounds. The Con­ser­va­tives had pledged in their most re­cent elec­tion man­i­festo to in­crease the tax-free per­sonal al­lowance from its cur­rent level of £11,850 to £12,500 by 2020. But as this news­pa­per has dis­closed, the Chan­cel­lor is ex­pected to scrap this pledge – which would amount to a tax cut – in a bid to raise money for the NHS and to pay for the ex­pen­sive Uni­ver­sal Credit roll-out.

The thresh­old at which high­er­rate tax is payable was also sup­posed to rise from £46,351 to £50,000 over the same pe­riod, but this is also un­der threat.

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Like­li­hood How to beat any changes

no mat­ter how much you earn, pay­ing into your pen­sion will cut your in­come tax li­a­bil­ity. The mar­ried cou­ple’s al­lowance is also a use­ful way to min­imise tax due.

Cuts to pen­sion tax perks

While pen­sion con­tri­bu­tions have long been a tax-ef­fi­cient way to use spare in­come, slash­ing the gen­eros­ity of pen­sion sav­ings is be­ing con­sid­ered. Most peo­ple can save £40,000 a year and £1.03m over a life­time into a pen­sion. The tax sys­tem en­cour­ages sav­ing into a pen­sion by of­fer­ing tax relief based on the saver’s mar­ginal rate. It costs a ba­sic-rate (20pc) tax­payer £80 to make a £100 con­tri­bu­tion and a higher-rate (40pc) tax­payer just £60.

This means that a vast amount of tax for­gone by the Trea­sury is claimed by wealth­ier savers. For years, pen­sion com­pa­nies have warned that the axe is about to fall on these perks. The Gov­ern­ment may re­duce the an­nual al­lowance fur­ther (per­haps to £30,000) or lower the thresh­old for the so-called “ta­per”. Cur­rently the an­nual al­lowance starts to be scaled back at £150,000 a year.

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Like­li­hood How to beat any changes

if new rules on tax relief are to be phased in, make use of the gen­er­ous pen­sion al­lowances while they last. Us­ing your

Philip Ham­mond’s Bud­get on Mon­day is ex­pected to in­clude tax rises. We ex­plain how to min­imise the im­pact of the changes No mat­ter how much you earn, pay­ing into your pen­sion will cut your tax li­a­bil­ity

Philip Ham­mond is ex­pected to scrap planned tax breaks in the Bud­get on Mon­day

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