The big change that is already safely on the statute book is the significant increase in national insurance contributions that we face from 6 April.
The impact of this £8bn extra levy is just starting to strike home – the contribution rates all rise by 1% but, crucially for the concept of the tax, there is the new 1% rate for employees and the self-employed on amounts of earnings or profits above the previously sacrosanct upper earnings limit (£30,940 from 6 April).
Incidentally, you may notice that I daringly referred to NICs as a tax – officially, of course, they remain a contribution rather than a tax, but surely this new unlimited 1% rate gives the final quietus to the idea that this levy is anything other than a tax.
Also in the ‘done’ category as far as tax raising is concerned is the fact that the basic personal allowance of £4,615 remains as it is for the coming tax year. Allowances for those who are 65 and over will increase, but for most of us they will stay the same.
It’s not all take, though. On the giveaway side, we must record the major revamp to the tax credits regime, with the switch to working tax credits and children’s tax credits from 6 April, involving some £2bn or so of extra money being available. Although these are firmly on the statute book, no doubt we will hear more about them in the Budget speech, if only to boost their take-up.
Then we come to things that are already in motion as far as tax changes are concerned – and here we find the real evidence that Brown is still in hyperactive mode. Stamp duty, corporation tax and pensions are all the subject of major reform consultations and we should hear something about how they are progressing. Stamp duty will also get a mention in terms of the exemption for commercial property in disadvantaged areas, which can now be taken forward.
The controversial review of the domicile rule might well get a mention, too. The pre-Budget report alluded to a review in the light of the government’s principles and that may produce some proposals for change. However, any change runs the risk of costing the country money overall, in that any restriction on the alleged tax break for the non-domiciles could scare people away – and with it their investment and spending.
If enterprise and innovation becomes a theme of the Budget, one plank to support it could be an announcement of a training credits scheme.
These have been piloted to replace the ill-fated individual learning accounts and could be launched more fully. At the more prosaic end of the spectrum, we could see a change in the taxation of company vans to a carbon-dioxide basis, following the lead set for company cars.
Going back to pensions, the reform document floated before Christmas has attracted a great deal of interest and comment, most of it favourable, though with some concerns over the £1.4m ‘pot limit’. If the pensions reform document leads people to worry that they will not be able to retire, the new pensioners’ credit, that will doubtless be one of the centrepieces of the Budget, deserves extra careful listening. This is due to come in from October this year and we need further details.
With all that lot already in hand, is there really a need for further changes? The undoubted answer to that question is ‘no’, but we are going to get further tinkering anyway.
For a start, income tax rates and the tax bands have to be set out. Don’t hold your breath for any changes to the tax rates – and I suspect we will see few if any changes to the tax bands, either. CGT and IHT changes will probably be restricted to a simple uprating of thresholds.
One area that could see more movement is savings. The child trust fund and savings gateway have been much discussed and these could be brought forward. Meanwhile, ISAs/ PEPs lose their dividend tax credit repayment from April 2004 and so become less attractive – Brown could provide for a continuation of that rebate.
Share schemes will no doubt get some attention, with changes likely in the wake of Mansworth v Jelley, together with confirmation that the relief for companies contributing to employee share schemes will be going ahead.
There will also be a few little giveaways for SMEs, such as a continuation of current 100% capital allowances for investment in IT equipment.
Is there anything that isn’t going to change? Despite the fact that I expect this to be a shorter than usual Budget speech, one constant is we will get a pile of press releases to pore over in its wake. It does seem as if change is all around. (Could I sell that to The Troggs as a new song title, I wonder?)
And, I almost forgot … the economy will receive a lot of attention in the speech, resulting in analysts searching through the Budget entrails for indications of where things are going. But that is a subject for an entire article in its own right.
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