Despite a derisory increase in the higher rate tax threshold, Budget 2014 was an authentic reforming Budget with its radical pension reforms and positive measures for business, argues Stephen Herring, head of taxation at the IoD
Strictly, this is not the final Budget which the Chancellor will be presenting before the general election in May, 2015. However, in practice, by Budget 2015, an imminent election will reduce the scope for authentic tax reforms as each coalition party will wish to be seen as having much more distinctive tax agendas. From an overall perspective, I consider that Budget 2014 has achieved the right balance between continuing to restore the UK’s fiscal position, incentivising key areas of the economy and some radical personal tax reforms.
Firstly, a few words about personal taxation. It is not difficult to predict that the need for a significant increase in the basic rate band will become an important issue in the election manifestos. The derisory increase in the higher rate tax threshold proposed for 2015/16 means a further million taxpayers paying income tax at the 40% rate and this includes an increasing number of lower/middle management and professionals in both the public and private sectors.
