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Budget 2011: Indexation for tax will switch to CPI from 2012

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The default measurement for taxation will move from the retail prices index to the consumer prices index from April 2012.

Delivering the Budget today, Chancellor George Osborne (pictured) said the decision is in line with the Government’s decision to switch the indexation measure for public sector pension increases from RPI to CPI last year.

The Budget will also abolish 43 “complex” tax reliefs, removing over 100 pages from the UK tax code. This follows recommendations from the Office for Tax Simplification made in March.

Osborne says: “Taxation should be simple and easy for people to comply with.”

The OTS report proposed merging income tax and national insurance and the abolition of contracting-out for final salary pension schemes, a move which experts say would save the Treasury £9bn and could pave the way for fundamental reform of the basic state pension.

Osborne today said the Government will consult on merging income tax and NI.

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