Grant Thornton's head of tax comments on what the new coalition
government's tax policies will mean for businesses and
individuals
Francesca Lagerberg, Head of Tax at Grant Thornton
Comments:
"Today's tax policy announcements are preparing the way for the
summer emergency Budget. They bring together many liberal reforms
to help low and middle income earners but show a hard attitude
towards the City with tough action on bankers' bonuses on its way
and a bank levy. The Coalition Government remains silent on what
other good news it will offer businesses in terms of tax reductions
but has decided fortunately for employers to scrap the Labour
Party's 1% National Insurance increase which was set to come in
April 2011.
"The bottom line is there is yet more change to the UK tax
system on its way which leaves taxpayers confused as to what will
hit their pockets. Clarity on the detail is unlikely before the
emergency Budget which is expected in June.
Capital Gains Tax: "Today's big news is that
Capital Gains Tax (CGT) will rise in line with the rate of income
tax. However, CGT was always a likely contender to be increased
after the General Election so this does not come as any real
surprise. This development will make those individuals with shares
or second homes shudder at the thought of what they are likely to
pay. It is unclear when these changes will be imposed but
traditionally such rises tend to happen from the start of a tax
year, ie April 2011.
"This change seems to take us back in time to before we had a
flat rate of capital gains tax. This was introduced just two years
ago in April 2008. The hope is that any change will not be before
2010/11 to allow sensible business and tax decisions to be made in
good time.
National Insurance Contributions: "Businesses
will be happy to see that the Coalition Government has decided to
reverse Labour's planned 'payroll tax' that was announced in the
Pre Budget Report 2009. This move is helpful for employers seeking
to take on more recruits and arguably will help reduce the rise in
unemployment. However, employees will still feel the sting as it
appears they will still suffer a 1% increase in national insurance
from April 2011 in their pay packets - the pain being particularly
felt by those on higher earnings.
Assistance for low and middle income earners:
"There is good news today for low income taxpayers as it looks like
those with incomes under £10,000 pa will be taken out of the tax
system entirely as personal allowances will be lifted to this level
- although it's unclear if this will happen in one go. This
positions the Coalition Government as a party that helps not just
high net worth individuals but low and middle income earners as
well.
Banking reform: "London will lose some of its
allure as a financial centre as the Conservative-Liberal coalition
seeks to introduce a unilateral banking levy and tackle head-on
bankers' bonuses. Labour's temporary banking tax did raise much
needed cash for the Treasury so this will be a healthy tax earner
and could hit bankers before their Christmas bonus is paid out. In
addition it looks like the FSA may not be dismantled as initially
proposed under the Conservative manifesto.
Inheritance Tax and Mansion Tax change: "These
two polices have been banished to the dustbin as the price that
both parties have had to pay to form this coalition. These policies
only target a minority of UK taxpayers and the scrapping of the
mansion tax in particular will be welcomed by the property
community which is only now beginning to come through the effects
of the recession.
"Now that the Tories are in cahoots with the Liberals, any
proposal that reaches out to high net worth individuals is likely
to be toned down," concludes Lagerberg.
ENDS
For further information or analysis please
contact:
Francesca Lagerberg, Head of Tax, Grant Thornton 07812
138 364
Suvra Datta, PR Manager, Grant Thornton 0207 728
2375
Nicola Daley, PR Executive, Grant Thornton 0207 728
2244