Well, we have a new Government, different colour – or colours.
What can we expect, and any immediate action needed?
Some of the Conservative parties election pledges will fall by the wayside as a result of the coalition. Whether manifesto pledges, as compared to the more general non manifesto pldeges surrive, who knows.
We are likely to see a “emergency” budget with in the next month, Capital Gains Tax is likely to be a high risk area, and may beneift from immediate planning – put simply if you are looking at disposing of an asset pregnant with gain in the near future, you may be best off doing it before the emergency budget, especially if it is not a business asset.
So, what do we know so far:
Income Tax – the new 50% additional rate for incomes over £150,000 is almost certain to stay, and there is unlikely to be any movement up or down on the 20% or 40% rates. Personal allowances are likely to increase significantly, although not in one go, over the life of the government to a target of £10,000 (currently £6,475) – although not mentioned, it could be tempting to pay for this by restricting the value of the allowances for high rate / additional rate tax payers.
Capital Gains Tax – likely to be a substantial increase in the current main 18% CGT rate, maybe up to the taxpayers marginal rate (20% / 40% / 50%); this is most likely for non business assets, and immediate attention in the next few weeks could be worthwhile to accelerate disposals. Its not clear whether there will be an increase in the discounted rate for business assets (currently 10% on assets up to £2m).
Inheritance Tax – the current exempt band of £325,000 is likely to remain frozen. The Conservatives wished to raise it, but this seems to have been sacrificed in the coalition negotiations.
Corporation Tax – may remain as is, may be cut – current rates 21% on first £350,000 then 28% thereafter. Conservatives were making noises about reductions. Rises unlikely.
National Insurance – given the sensitivity of this in the election campaign its certain there will be no rises in employers NI, and its likely that employees NI will remain unchanged. (Edit: over the last weekend its been speculated that a rise in Empoyees NI, but not Employers NI, is quite likely)
VAT – commentators have suggested that a VAT rise could be a easy option for deficit reduction. The UKs VAT rate is one of the lower ones in the EU.
Tax credits – likely to be restricted for higher earners who currently qualify for the child element.
~ At a guess Income Shifting / S660a won’t resurface.
~ Conservatives had pledged to abolish IR35 – this is unlikely to be a priority, but they may just surprise us.
We’ll keep you informed as and when anything else comes out.
CGT is probably the main immediate concern.