Today's Budget lifted the level of personal tax allowance, proposed a merger of National Insurance and income tax and set out plans to tackle tax avoidance and evasion.

The chancellor, George Osborne, said the initial level of personal tax allowance would be lifted by £630 to £8,105.

This change would come into effect in April 2012 and see 1.1 million people taken out of the tax mechanism altogether.

Osborne said this did not mean any further taxpayers would be pulled into the next tax band.

From April 2012, the default indexation assumption for direct taxes will move to CPI.

Simpler taxes, but tougher on tax dodgers
 
He also announced the removal of several tax reliefs and revealed that consultation would soon begin to look at simplifying tax, including a merger of National Insurance and income tax.

‘I can announce today that this Budget abolishes no fewer than 43 complex reliefs,’ he said.

He decided not to follow the advice of the Office of Tax Simplification to abolish the community investment tax relief,  instead encouraging people to take it up.

The chancellor added that he would also tackle tax avoidance, which the HMRC estimates costs the UK around £14 billion a year, and predicted that this would help the Treasury to raise a further £1 billion.

A new strategy paper, Tackling Tax Avoidance, is published today that sets out specific measures to shut down the ‘open abuses that have been allowed to continue for too long’.

The chancellor said these will include closing down three forms of stamp duty land tax avoidance, tightening capital gains rules for companies and ending the practice of ‘disguised remuneration’, which currently permits highly paid employees to be offered tax-free, lifetime loans that are never repaid.

He added, ‘We are doing more today to clamp down on tax avoidance than in any Budget in recent years.'

One other area that needs extra work in the coming months, he said, was the taxation of very high-value property, ‘where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share’.