The political theatre of Budget day, with its heady mix of data on the economic state of the country and proposed tax changes will be particularly heightened this year.
A recovery is underway but the government’s expenditure is still far in excess of its tax and other receipts. On the political front two significant events will loom large Chancellor’s sights. One is 7 May 2015, the date set for the next general election at the end of first ever fixed term parliament, the other 7 September 2014, the date of the Scotland referendum. The 19 March Budget is the Chancellor’s final opportunity to set out his stall.
- The good news of growth in the economy, falling inflation and increased levels of employment
- Taking more of the lower paid out of tax with personal allowance increasing to £10,000
- Continuing reductions in the headline rate of corporation tax making the UK an attractive location for businesses
- No immediate increase in the duties on petrol or diesel
- A continued “crackdown” on tax avoidance
- A robust defence of a top income tax rate at 45%, asserting a higher rate would result in less income tax being collected and asserting the intention to remove the additional rate as soon as improving economic conditions make it appropriate
What surprises might Mr Osborne pull out of the budget box?
- For individuals – a further increase in the income tax personal allowance
- Energy taxes – softening, or perhaps freezing of increase in levies on electricity generation
- Businesses – a more generous annual investment allowance for capital expenditure on plant and machinery than the limit of £25,000 a year due to apply from 1 January 2015, which would be a 90% reduction from the present, albeit temporarily high, £250,000 limit.
- Savings – an increase in the cash ISA limit as this would not actually “cost” that much due to the continued expectation of low interest rates, this could be presented as a way to reverse the precipitous drop in personal savings.
- Capital gains – the 28% main rate of CGT partly compensates individuals for the absence of relief for the effect of inflation, might this rate be reduced to encourage investment?
Whatever tax changes are announced on 19 March we will analyse them to identify the essence of the practical impact: what the change will actually mean for you. Visit our blog for articles about further developments.