Wednesday, 16 March 2016 09:23

Budget 2016: Money Advice Service chop and tax tinkering

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The Government’s latest Budget is set to be announced this afternoon, with reports this morning that the Money Advice Service could face the chop.

According to the Financial Times, George Osborne will signal the death knell of the MAS, which has faced a barrage of criticism from MPs in the last couple of years.

While education looks likely to grab a lot of the headlines, pensions are still expected to feature in the speech in some form, with further tinkering with taxation likely.

Although some of the more radical ideas surrounding pensions tax relief and pension ISAs appear to have been put on ice, if not scrapped entirely, some commentators have predicted a further cut in the Lifetime Allowance.

Possible changes to the annual allowance and Pension Salary Sacrifice have also been forecast.

Mr Osborne may look to force companies to pay National Insurance Contributions on pension contributions according to some in the industry, while changes to ISAs have also been discussed.

Richard Libberton, private wealth manager at Anderson Strathern Asset Management, said despite changes to pensions tax relief being “parked for fear of backbench revolt” the present pensions system is “unsustainable in the long run”.

He said: “I do expect him to change tax relief on pensions and he is running out of time to get this through before campaigning season in the run up to the next election.

“Pensions may not however remain untouched in this budget and options open to him would be to reduce the annual allowance further, from the £40,000 in place today.”

Tinkering with the limits on the new tapered annual allowance, which is due to come in from 6 April 2016, may also be considered, he believes.

He said: “This would affect those earning over £150,000 as it stands today, but this limit could well come down to a lower figure, which will reduce the ability of those higher earners to continue to benefit from tax relief.

“Perhaps he will also consider a further reduction in the lifetime allowance for pensions savings, from the amount of £1m which is effective on 6 April 2016.

“Salary sacrifice schemes must surely now be in the crosshairs of the Chancellor. These schemes offer individuals the chance to ‘give up’ earnings in return for a range of benefits such as further pension contributions or even gym memberships. Employers do not need to pay National insurance contributions on the sacrificed salaries, which robs the Exchequer of much needed inflows.”

Financial Planning Today will be covering the Budget live here and via Twitter. From 12.30pm.

Last modified on Wednesday, 16 March 2016 11:22
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