The points I would like to make concern three issues: One is not in the budget at all, one was dropped but half remains and the other is a surprise. With a postscript on the missed opportunity.
Not there at all:
Amalgamation of National Insurance and Income Tax.
This is the BIG REFORM which will probably be George Osborne’s memorial. It is not in the budget but the abolition of Class 2 and the Single Tier State Pension make it a lot easier to amalgamate the two taxes.
Dropped but a bit remains
The Pensions ISA
Renamed the Lifetime ISA it is in there (from April 2017) and if you start work at 20 and contribute for 50 years you might have £500,000 there on which to retire, all tax free, when you retire at 70 (this assumes a 5% return on investments) If you had at the same time put the maximum £20,000 pa into ISAs out of taxed income you would have another £2.5m , also untaxed The current LTA is £1m so given the income from one is taxable and the other is tax free we can say ISAs are now more important for most young people than their pension scheme.
What was dropped was the logical follow up which is to phase out all tax relief on all pensions contributions and allow conversion of existing pensions pots into Lifetime ISAs. The supplement on contributions up to £4,000 replaces tax relief for the lower paid and Osborne has already in effect removed tax relief for highly paid and for those with large funds so the Pensions ISA has appeared through the back door and with little fanfare.
In there but a surprise
Is the cut in CGT to 10% for basic rate payers and to 20% for higher rate payers. This takes us back to below the 18% of 2008 (set by Alistair Darling) for many. There is now a big incentive to change income into capital. The Chancellor will get more gains tax and call it a success but most of it will be an illusion.
The missed opportunity
Was a rise in oil duties, no-one would have noticed much with oil prices falling.
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