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What’s in the Budget Box?

Dear Chancellor,

Inheritance tax

There are suggestions you could cut the rate down to 10% from the current rate of 40%, while lowering the amount of tax-free allowances (such as tax-free gifts between families) and set a £30,000 cap on cash gifts during a lifetime.

I believe the inheritance tax rules are peppered with historic oddities. These include the seven year time limit on Potentially Exempt Transfers and an array of different gift exemptions. Worse, a flat rate of 40% (applied in all but a few circumstances) arguably penalises the relatively small number of estates that are caught by this tax unduly harshly. Any simplification of the rules would therefore be welcome.

Pension Tax Relief

The Treasury is understood to have drawn up plans to cut the rate of relief for higher earners from 40% down to 20%, raising £10bn per year.

Saving for life after work is a huge challenge for most people and especially those who do not enjoy final salary pensions. In that context any move that disincentivises pension saving, such as scrapping higher rates of tax relief on contributions, would be counterproductive.

Housing

In the Queen’s Speech, it was announced the government would ‘take steps to support homeownership, including by making homes available at a discount for first-time buyers.’ The Conservatives have pledged to give at least a 30% discount to this group of aspiring homeowners, and it likely that you will place a focus on this pledge in the Budget.

I think the Government should focus on solving the lack of supply when it comes to suitable properties for first time buyers, rather than introducing yet more measures (on top of schemes such as Help-to-Buy and Lifetime ISAs) that effectively only stimulate demand and therefore drive up prices.

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