Emergency Budget: clarity needed
George Osborne must now fully reveal how the tax rises accompanying the £6.2bn of spending cuts will work in the emergency Budget
George Osborne is hours away from delivering his maiden Budget speech, which
will finally lay out in detail the coalition’s plans for the next five years.
The coalition hastily cobbled together a joint manifesto, which saw the
Liberals and Conservatives both forced to make compromises.
The 18% flat rate of capital gains tax on non-business assets, such as second
homes and shares will be closer aligned to the 40% rate of income tax to the
anger of some in the Tory Party.
The chancellor is also expected to provide more clarity on what will fall in
or out of the CGT net.
The Liberal Democrats are believed to have insisted on a rise in the tax free
personal allowance in efforts to benefit the UK’s poorest paid.
VAT is expected to rise from 17.5% to 20%, which would bring £12bn into the
Treasury’s coffers. Osborne will explain whether this be staggered over a number
of years or introduced in one go.
Small business leaders have made calls for a single increase to be spared the
administrative burden of repeatedly changing their systems.
Today’s emergency Budget will provide clarity on how close to £10,000 the
threshold will go.
To pay for this, employees will still weather Labour’s 1p increase in
National Insurance, despite the Conservatives vowing to stop the tax on jobs.
It is unclear whether the chancellor will further backtrack on employers’
contributions.
Both parts of the Lib-Con pact have stated their commitment to a tax
avoidance clampdown, favouring general anti-avoidance rules which spread the net
wider than targeted anti-avoidance rules.
Resources & Whitepapers
Accounting Software The power of customisation in accounting systems
Advisers have warned against the scattergun approach of general anti
avoidance rules, but the issue is sure to be addressed in the budget.
After the payroll tax and introduction of the 50% top rate of tax, high
earners at banks have been under the cosh.
However, Osborne may heap more misery on the sector by setting out plans for
a bank levy, demanding a slice of banks assets or profits to prop them up in the
event of another financial meltdown.
Further reading:
Osborne:
Budget will be harshest for 30 years
Osborne
plans NIC break for new companies in deprived areas