What Will The Coaltion Government’s First Budget Bring?

26 05 2010

Last week, our new Chancellor, George Osbourne, announced that his first budget date will be on the 22nd June. Since then, there has been much speculation as to what this has in store for us. Below are just a few things I’ve come across:

Personal Allowances – Before Election Day, it was well published that the Liberal Democrats wanted a £10,000 personal allowance; and we know that this was one of the concessions agreed under the new coalition government. The aim of this is to help low and middle earners, so I would expect it to be capped at a certain level of income. This is expected to come into effect during 2011.

Corporation Tax – There have been a lot of mixed messages regarding corporation tax policy. Over on Accountingweb, they have an article suggesting that the main rate of corporation tax for large companies will be reduced to make the UK more competitive. If this happened, to pay the difference, the rate of corporation tax for smaller companies may have to increase, together with the abolition of the annual allowance.

Others are suggesting that there will be a cut in both larger and smaller company corporation tax – but we’ll have to wait and see!

Capital Gains Tax (CGT) – This, in my opinion, is where we will see the most significant changes; CGT currently stands at 18%. If changes are made, we could see a future tax rate of 40%. There is also a lot of uncertainty as to when the government will introduce these changes. Changing it halfway through the tax year (budget date) would be the most effective for the Taxman in regards to revenue, but could cause them a logistical nightmare. Some commentators believe it will be introduced on a more realistic date of 6th April 2011.

For those of you sitting on large capital gains at this point, look out for these changes, and be prepared to act quickly to release the gain at 18%; if the rules are introduced next year.

VAT Changes – The big question is will VAT be raised to 20%? When Labour reduced it to 15% in December 2008, there was much discussion that when the rate increased again, it would go up to 20%. At the time, this caused an uproar as VAT has an impact on almost everything we buy. Although it would be a quick way for the Treasury to bolster their piggy banks, could it be too unpopular for a new government to implement when they are still finding their feet?

National Insurance rises – This could be good news for employers as it is being suggested that the proposed 1% increase will be stopped. However, the 1% increase for employees could still go ahead.

For help with planning for the Tax changes in the Budget, Why not check out the Best Accountants in Sussex?Tax Accountant

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