A new government, a new budget. So what can we realistically expect from the new budget which is set to be announced by George Osbourne on Wednesday 8th July? And how will this affect you, your taxes and your corporation tax planning? In what some believe is an already over-taxed population, what do we have in store for the next year? There have been a few indicators of the way that the budget is heading from the Queen’s speech in May and the Conservative election manifesto.
Now that the Liberal Democrats no longer have any power to block the ‘Conservative Dream’ they can go full steam ahead in shaping a Conservative Britain. Here is some of what is to be expected to be released on 8th July…
The Queen’s speech at the end of May described a ‘tax lock’ on National Insurance, Income Tax and VAT rates. This is obviously good news for the average man on the street, meaning that there will be no reduction in the money coming into his pocket, nor on the VAT that is paid, but it does beg the question of where the money will be replaced from.
Capital Gains Tax
It seems obvious that there will be a rise in Capital Gains Tax – the tax which is paid on anything that is sold for a profit. The main contributors to CGT are investors and multi-property owners, meaning that this shouldn’t adversely affect the average working man, but companies and the wealthier may suffer more.
The Conservative election manifesto suggests a cut in inheritance tax on family homes, meaning that family members of the deceased will be relieved from paying tax on property up to £1 million in value. At present, the tax paid on a £1 million estate is £140,000, so this would be a huge help to many families. It has been suggested, however that this may mean that older people are deterred from down-sizing, which could affect the housing market.
It has been suggested that the shortfall from the reduction in inheritance tax will be made up for by reducing the tax relief on pension contributions of over £150,000 per year. This means that only those on a very high pension will see any negative affect.
Although it seems that these tax cuts will be a help to the average man on the street, great attention should be placed on where the money will be found from. George Osbourne is set to introduce a whole array of welfare cuts to make up for the deficit and it does appear that despite how it may look on the surface, those who will really, and disproportionately benefit from these tax cuts will be those who are already wealthier.