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More complexity but little impact

The Chancellor continued the Government’s long-standing approach to fiscal policy by extending the complexity of the personal tax system.

In a return to tax rates last seen in the 1970s, he announced not only the introduction of a 50 per cent headline rate of income tax for people with income over £150,000 but also a 60 per cent marginal rate of tax from April 2010 for those over £100,000.

After substantial speculation on the abolition of higher-rate relief on pension contributions, he settled on applying this red-uction only to the top 1 per cent of taxpayers – those with income over £150,000. It seems likely that this will have limited impact on the UK long-term savings industry as these monies that might otherwise have been invested in pensions will simply find a new home to deliver income in retirement.

Darling also heeded the representations of the investment industry by increasing Isa allowances from £7,200 to £10,200 with effect from October 6, 2009 for those aged 50 and over. This will be unlikely to increase overall savings rates in the short term but instead will facilitate the movement of existing assets to a more tax-favoured environment more quickly.

All this increased complexity in personal financial planning will drive the need for advice and advisers are well placed to capitalise on this demand.

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