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Summer Budget: Your finances

Giving with one hand, taking with the other

Alan SteelI’m struck by the reference to The Office of Tax Simplification which doesn’t sit comfortably with a 106 page Summary from HM Treasury. Maybe it’s George’s idea of a joke.

Next up is the realisation that any change announced in taxes, pensions, or investment doesn’t apply until next tax year at the earliest.

Which is just as well given the lack of joined up thinking on display in George’s speech.  So he’s going to look at ways of changing the long term savings habits of the UK by designing an ISA where investors pay tax and then invest so they get the “income” later tax free?  Marvellous.  Erm….but that’s what PEPs and ISAs used to be.  So how do we know tax free returns won’t be plundered retrospectively?

Take Pensions. George declares he’s preparing a Green Paper to discuss ways of “radical changes” to pensions.  In the next breath he announces the lifetime allowance will fall yet again next April by 20% to £1 million.

Sorry George, you’ve forgotten it’s just a few years ago Labour’s Mr Broon brought in this cap at £1.8 million to be revalued upwards.  And by the way that was a retrospective attack on promises laid down to pre 1987 members like me.  Thank goodness though he’s knocked back “freedom from straitjacket annuities” changes until 2017.  What a disaster that could be.

Nothing else much to report for serious savers, a tweak here and there, all applying from next April so don’t get too excited folks.  A wee bit more into your ISAs, a smidgeon less in tax for those lucky enough to be on the cusp of 40% inc tax.  But if you are a smallish investor in stocks outside ISAs you might find you’ll pay less in tax on dividends next year if you’ve any money left after paying a tax person to complete your ever complicated annual return.

The expected reduction in pensions tax relief for high earners came about.  No surprise there.  But the message is plain to see. This Government appears to give with the one hand and take with the other.

And it’s good news for the thousands of older folks who bought their family property in the South East, and who didn’t fall for previous Government promises on private pension plans and tax free alternatives.  £1 million passed down tax free if you’ve got a big house.  Don’t imagine it’ll be that simple. And if you’ve one foot in the grave hang on, it doesn’t happen until 2017!

Alan Steel is the owner of Alan Steel Asset Management

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