With just a week to go before the Chancellor delivers his seventh Budget, many commentators would dearly love to take a sneaky peek inside that famous red box and confirm or otherwise their predictions on the contents of the Budget speech. This year however the Budget augurs would appear to have been wrong-footed by the Brexit debate and the Chancellor’s need to stay in the race to become the next Prime Minister.
There is little doubt the Chancellor had considered raising much-needed revenue for the Treasury by altering pensions tax reliefs and giving away some of the taxes raised in the form of reductions of higher-rate taxes for middle earners. Following various representations the Chancellor is set to abandon his plans for pensions reform, or at least defer them until a later date, so if the tax cuts are to be maintained what sources will the Chancellor turn to if order to balance his books? The proposed rise in fuel duties will certainly help, but I cannot help feeling the Chancellor will not have given up entirely on raiding the pensions pot further.
His targets may include the reducing the amounts that can be paid as tax-free lump sums which according to recent studies costs the Exchequer a whopping £6bn. Another target may be the use of salary sacrifice schemes which is difficult to justify. Other than sacrificing pay for pensions, which reduces the NIC bill for both employers and employees, there are other easy targets including free parking for employees. Under this type of arrangement, the employer pays for parking close to work and deducts the cost from employee gross pay. The employee saves both tax and NIC and the employer saves NIC.
At a time when we should be encouraging greater use of public transport, it does seem odd to give tax breaks to people who choose to drive into city centres.
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