Next UK budget 30th June? VAT to be 20%?

Posted on: 19.05.2010    12:13:56

As the coalition policies take shape, we are already seeing in clear terms the influence of Liberal Democrat views reflected in tax policy.

It was a key part of the Lib Dem manifesto to raise personal tax allowances to £10,000.

The total cost of this was estimated at £17 billion and, rather than introduce it at one go, it is being phased in over 5 years.

This will still give an income tax saving of £140 a year for everybody paying basic rate tax.

At the same time, the Conservative plan of lifting the national insurance threshold to limit the damage of the increase of 1% in the national insurance rate from next April for employees earning up to £35,000 has been shelved and the cut off point will now be the original labour threshold of £20,000.

The key Conservative policy of preventing the jobs tax for company employees up to £35,000 has, however, been retained.

Bad news for those with second homes and larger share portfolios because the coalition deal will now introduce the Lib Dem policy of taxing non-business capital gains at income rates, although not above 40%.

Behind the scenes negotiations are still going on between the two teams as to whether the Lib Dems will also be able to force through a reduction in the annual capital gains exemption from its current £10,100.

At the moment, only about 130,000 people every year pay capital gains tax but this would rise to about 500,000 if the threshold was cut to the rumoured £2,500.

For tax policy, this is the dawning of a new age. Get ready for an emergency budget on Wednesday 30 June when we can also expect a hike in VAT to 20%.

Will we see simplification of the tax process and combination on income tax and national insurance announced? Unlikely but it should end the Brown era of stealth taxes.

 

Author: Chris Slay

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