Budget 2015 - Expect the unexpected!

Budget 2015 - Expect the unexpected!

Budget 2015 - Expect the unexpected!

With next week’s Budget speech being so close to a General Election, we can expect some interesting announcements which will no doubt be politically motivated given their timing. 

UK economy – bounced back?

With unemployment at its lowest level since 2009, confidence in the UK economy seems to be growing.  We’re expecting the Chancellor to focus much of his speech on economic growth, as we gear up to the election.

Pension contributions - Further restrictions ahead?

Much has been made about the new flexible pension drawdown regime, which is good news for those who have made pension contributions over the years.

However, successive Budgets have also seen more and more restrictions being placed on the amounts which can be saved in pension funds over a lifetime, as well as the maximum which can be contributed on an annual basis.  The lifetime allowance has already been scaled back from £1.8m to £1.25m since 2012.  Annual maximum contribution levels have also been reduced from £255,000 to £40,000 since 2011.   

It is therefore possible that we may see further restrictions in the form of a withdrawal, or at least limitation of relief for higher rate taxpayers making pension contributions, as part of this Budget. 

Tax avoidance under further scrutiny?

Most commentators are expecting the announcement of further measures designed to tackle aggressive tax avoidance.  It is very likely that the Chancellor will provide further resources and powers to HM Revenue & Customs to deal with tax avoidance and evasion, with the possibility of sanctions for advisers who assist and abet clients in this.

More basic rate taxpayers?

For a number of years now, we have seen the tax free personal allowance rise.  However, the effect of this has been negated for ‘middle earners’, who have seen a reduction in the threshold after which higher rate tax becomes payable.  It is likely that in the run up to the election, we will see a measure designed to help those on reasonable incomes, by increasing this threshold from £41,865 to £50,000 by 2020. 

Annual Investment Allowance – will it stay or will it go?

Successive Budgets have kept the Annual Investment Allowance high with the current allowance being £500,000.  However, for a number of years accountants have been mindful that there will be a drop to just £25,000 around the corner.  For the last 3 Budgets, this reduction has been postponed.  Originally we were expecting the Annual Investment Allowance to drop to £25,000 by 1 January 2015.  Instead, it was increased from £250,000 to £500,000 with the proposed decrease to £25,000 scheduled to take effect from 1 January 2016.

However, with an election looming, a reduction in the allowance may not be popular.  Therefore it is possible that we may see a further timing extension to the current level of Annual Investment Allowance.  

If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:

Chris Barrington
email: chris.barrington@jsllp.co.uk
telephone: 01942 292505