It’s been 20 years since the Conservative Party delivered its last Budget, but will it be one to remember? Will Chancellor George Osborne use the fact that the government is now here to stay for another 4 years to stamp his authority on how the Government will run the country?
What can you expect from this Budget?
We know that George Osborne has a target to save £30bn in total as part of his deficit-reduction strategy, and this will be done in the following ways:-
- Departmental spending cuts totalling £13bn.
- Cuts to benefits totalling £12bn.
- Raising £5bn from closing in on Tax Avoidance Schemes.
One department that the Government is spending more on is the customer service workforce for HMRC. Apparently this under-funded and underperforming department will be handed an additional £45 million to improve its service to taxpayers.
Can we expect any changes to tax rates and taxation legislation?
We know that from the Queen’s speech, the government
is committed to not increasing VAT, national insurance or income tax during the new parliament, which is good news. We also know from this manifesto the following:-
- There will be an increase to the level income tax first kicks in to £12,500 (it is due to rise from £10,800 to £11,000 next year).
- Introducing a tax-free minimum wage – meaning that anyone working 30 hours on the minimum wage would pay no tax.
- Raise the 40p tax threshold to £50,000 (This will have an impact on the 800,000 people who earn between £42,385 and the £50,000 level)
But as history dictates, a Government does not have to increase tax rates, to reduce a deficit. Changes in tax legislation are just as effective.
So what changes could be implemented when Mr Osbourne takes to
the rostrum on 8th July?
There has been talk of changes to legislation relating to landlords and
what they can or cannot claim against their profits. There has been particular concern as rumours have been spreading that the Government is considering altering the current tax system, which allows rental income to be offset against mortgage interest payments. We will have to wait and see if and how these changes will be administered.
We know that the government has imposed a freeze on Income Tax, National Insurance and VAT, but what about Stamp Duty, Capital Gains Tax (CGT), Bank Levy’s and duty on wine and spirits. Due to the recent rise in the value of property, we expect some changes to the CGT rates. We can expect changes to the other minor taxes too.
Whatever Mr Osbourne puts into place, he will state his commitment to the long term. Can we expect a difficult 4 years ahead? Increases in taxes may be frozen, but expect tax reform to be top of the agenda.
Please look out for our WHA Budget Summary due on 9th July 2015 outlining all of the changes.