An emerging theme is a simplification of the tax system for basic rate taxpayers coupled with significant further complexity for companies and high-income individuals. It’s worth asking whether the bundle of tax changes for individuals proposed by the Chancellor risks stifling aspiration. While the dividend tax allowance will benefit those with only modest savings income, holders of larger investment portfolios will find their tax bills rising as the new dividend tax regime takes effect.
At the same time, the restriction of tax reliefs for buy-to-let property will reduce the post-tax return on rental income. Even in the current relatively low-interest environment, that may feed through to increases in rents. When interest rates begin to rise, it’s almost inevitable that rents will do likewise in response to the tax changes.
Once they have come to terms with the changes, high-earners who contribute to pension plans will quickly come to the view that they are simply one tax-preferred means of providing for post-retirement income. Once tax limits have been reached, it’s necessary to pursue other investment policies.
And finally the question of non-doms. The Chancellor has judged that more feathers can be plucked without undue hissing. In a further sign that this Conservative Budget has borrowed heavily from Labour policies, it’s difficult to escape the conclusion that the Chancellor would be entirely happy for domicile to become completely irrelevant for all UK tax purposes.