It’s Budget week and contractor accountants throughout the country will no doubt wonder if the Chancellor, George Osborne, has any unwelcome surprises up his sleeve.
As always, accountants have been looking into their crystal balls and trying to predict the contents of Osborne’s Budget day speech.
Grant Thornton’s head of tax, Francesca Lagerberg, expects the Chancellor to reaffirm that income tax personal allowance thresholds will increase to £10,000 by 2015. It has been suggested that the rise should occur sooner, but such a move would prove costly and is therefore unlikely to happen, she added.
Budgets often contain measures to clampdown on tax avoidance and Wednesday’s will be no exception. Boris Johnson, the Mayor of London, recently called on the government to close the loophole that allows the super-rich to avoid paying stamp duty on their properties. Louise Somerset from RBC Wealth Management expects George Osborne to tighten the rules on Stamp Duty Land Tax, especially where offshore companies own UK properties and that ownership is transferred by the sale of the company’s shares.
What is going to happen to pension tax relief? There has been a lot of speculation about this in recent weeks. Financial services company, Hargreaves Lansdown, thinks the Chancellor may reduce the tax-free annual savings allowance by £10,000 to £40,000. This would be a simple measure to implement and would only affect the tax relief enjoyed by high earners.
Another tax that has been in the news a lot recently is VAT. A lot of people would like to see a reduction in the rate of VAT, but according to PKF, even reducing the rate on labour intensive services might be an expense too far for the government. Francesca Lagerberg thinks there’s an outside chance that we hear about a 25% VAT rate on luxury items. That would not be a popular move amongst the wealthy, especially if they already pay top rate tax.
There’s only a couple of days left before Mr Osborne makes his much awaited speech and we discover whether any of the above predictions come true. In the meantime, back to the crystal ball…