As with recent Budgets, it is unlikely
that there will be any major surprises come April 17th. We will once
again be subject to a regurgitation of previously announced measures,
coming into effect for the 2002/03 Tax Year, and the announcement of
measures to be implemented over the following Tax Years.
This Chancellor has a liking for
announcing measures one, two or even three years in advance. The more
cynical amongst us may say that this tactic gives him dual benefits.
Firstly, he can repeat all the popular measures at every given
opportunity for maximum effect. Secondly, unpopular measures can be
announced so far in advance that we do not worry about them at the
time of the announcement and have forgotten about them by the time
they come into effect.
In his Pre-Budget Report last November
Gordon Brown announced the income tax allowances and National
Insurance bands and rates for 2002/2003. He also confirmed the
accelerated capital gains tax taper relief for business assets that he
had already announced in June. Recently, he announced the income tax
bands for next year together with the capital gains tax annual
exemption and the nil rate threshold for Inheritance tax.
For businesses, the Chancellor has said
in recent speeches that there will be no short-term lurches in policy
that may risk the long-term stability he is aiming for.
Among the measures already announced are:
A new research and development tax
credit for large firms;
£20 million to fund best practice initiatives in industry;
The forming in every region of the country locally based venture
capital funds - in Yorkshire, for example, this fund will be £25
In high unemployment areas, the abolition of stamp duty on all home
and business property transactions up to £150,000;
Helping with premises and business support through the £75 million
business incubation fund.
The Budget in April will be a Budget for
enterprise as well as for our public services.
It is accepted that the National Health
Service is in need of a massive injection of funding and the
government has been preparing us for the fact that we will have to pay
for it, as if we did not know! The question is how will this and other
initiatives be funded?
We can only speculate but there are some
Income tax: it seems unlikely that the
Chancellor will raise income tax rates in direct contradiction of the
government's election manifesto. However, he could increase income tax
revenue without increasing the tax rates, either by restricting the
value of allowances or by increasing the amount of earnings taxable at
the higher rate.
National Insurance: although it is
difficult to draw a distinction between National Insurance
contributions and income tax, Gordon Brown may be more inclined to
increase employee National Insurance contributions. His likely method
would be to increase or even remove the upper earnings limit for
Value Added Tax: with the UK's VAT rate
lower than the European average and the last increase more than 10
years ago, there is the possibility of a hike in the rate of tax or
the removal of certain exemptions.
Inheritance Tax: every year there is
speculation about changes in this area but there have been no major
changes for 15 years. The Chancellor could make it more difficult to
make lifetime gifts but it is unlikely that we will see any changes in
a tax which collects an insignificant amount of revenue for the
Stamp Duty: with no sustained signs of a
slow-down in house price increases, the Chancellor may consider a
further increase to rates of duty, especially on the more expensive
Petrol, tobacco and alcohol: the public
outcry over fuel prices seems to have died down so do not be surprised
to see the Chancellor taking the opportunity to add a few pence to the
price of a litre of fuel. Tobacco, as always, seems a likely target,
driving even more people over the Channel for their cheap cigarettes.
Alcohol seems likely to avoid any major increases again.
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