Your Money: No sign of the Budget axe

Click to follow
The Independent Online
THERE is a weird calm ahead of this year's Budget. Unusually, there has been no hint of a rumour designed to send us shopping for some too-good-to-be- missed number that is shortly to suffer the Chancellor's axe.

Indeed, one of the most cheering bits of advice warns that VAT rates may rise and spread wider, so if you think you may want to splash out on a new CD player or washing machine - do it now.

It makes a change from the dour savings-oriented advice that usually heralds a new Budget. For once, the Government would like us to indulge in a little more retail therapy to put some zip into the high street.

But until the spectre of unemployment is exorcised, the joy of shopping will always make us feel a bit edgy.

What else might the Chancellor deliver on the 16th?

The consensus at the moment is that the package is most likely to be tagged a Budget for Recovery, Jobs, Industry or some such, with measures to improve training and investment in industry.

On the personal front, Peps, pensions, company cars and road tax, housing, National Savings and inheritance tax could all come into the speech.

The betting on Peps is that the restriction on equity investment could be lifted to encourage savers to buy gilts and help the Government fund its borrowings. Gilts already look a good bet in the light of soggy interest rates. It would not make sense to wait for the Budget to invest.

Further restrictions on the tax relief on pensions, such as holding down the cap on higher earners and even limiting relief to the basic rate, like mortgage tax relief, are possibilities. But it is likely that new rules will operate from the start of the new tax year, so there is no need to rush in ahead of the Budget.

The Government might allow all pensions to be taken in cash instead of mostly as an annuity as a balancing gesture. But this would give the elderly the freedom to blow their pensions savings on a round-the-world trip and then throw themselves on the welfare state.

On the other fronts, there is little that can be done to avoid the impact of the Budget. Fill the car with petrol and, in anticipation of improvements to inheritance tax, try not to die until after 6 April.

AS THE women of Newnham College, Cambridge, went about their business last weekend, they were accosted at the porter's lodge by fellows asking them to leave their rooms for six weeks.

The motives were purely financial. The college has got involved in a Business Expansion Scheme and needs vacant rooms so it can deliver tax relief to investors.

It has not all been plain sailing for investors in the Oxbridge Colleges BES sponsored by Johnson Fry. Between exchange of contracts and completion, University College, London (no, it's not really Oxbridge) let rooms to overseas students. But BES rules specify that lets must be assured tenancies. So the summer's lease may have broken the rules.

Johnson Fry says its legal advice was that BES interest only began on completion, but the Inland Revenue, which might have been expected to cough up the tax relief to investors by February, is still pondering.

And 1,500 investors are fuming because it seems likely their fixed return will yield a modest 4 per cent after five years, rather than the bonanza delivered by adding in 40 per cent tax relief.

This academic dust-up should only affect BES schemes using existing halls of residence. But the saga cannot but reinforce the view that the BES is a ridiculous perversion of the tax system.

THE quaint notion that the self-employed should queue in the post office every week to buy a stamp to stick in their little books has finally bitten the dust.

From April, the National Insurance Card will join ration books and Green Shield stamp books on the scrap heap of history.

The self-employed and those paying voluntarily to keep their record up to scratch can choose to pay monthly by direct debit or quarterly in arrears.

Why start paying monthly in April when you can postpone the outflow until July?

Unlike some electricity companies who want to persuade customers to move to this 'painless' and cheaper-to- process form of payment, there is no discount for direct debit. So I suspect that many hard-pressed NI payers will opt for the four times a year nuisance rather than smooth the payments out over 12 months.