EDITOR'S LETTERMerryn Somerset Webb
Budget verdict: not too bad
This week’s Budget was well trailed. We knew George Osborne would introduce a few policies of which we thoroughly disapprove. The new inheritance tax (IHT) allowance for houses, for example. The British are quite obsessed with houses enough already. Any rise in the IHT allowance should have been a general one: what makes a “family house” more important than a favourite picture or classic car? It’s silly, to say nothing of mildly unkind to those who haven’t indulged in the UK’s top hobby of constantly upsizing and hoping to make tax-free capital gains.
Then there is the cut in pension tax relief allowance for those earning over £150,000 (tapered from £40,000 to £10,000). This will be an administrative nightmare for high earners (many of whom won’t know how much they earn in a year until that year is nearly over) and for their accountants. It’s a complicated crowd pleaser of the kind I wish governments would have the confidence to give up. And of course there are the changes to dividend tax. Why so complicated? Why not just tax dividends as income at the same rate as income and be done with it?
That said, we also find quite a lot in the Budget to approve of. We have long campaigned for a rise in the minimum wage to stop the taxpayer subsidising the profits of big corporations via tax credits. So we like Osborne’s new living wage policy.
We have also often noted that it is not possible for productivity in the UK to improve without a shift from high welfare (that creates an incentive for part-time work) to higher wages. So we think we like Osborne’s reform to child tax credits, housing benefit, the benefits cap and the new obligation for the young to “work or learn”.
Finally, we’re very interested in the cut to the tax relief buy-to-let investors can claim.
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