Taxes and the emergency budget
-Julia Whittle is head of International at Punter Southall Financial Management. The opinions expressed are her own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-
It is highly unlikely previous Capital Gains Tax proposals will be reversed in Chancellor George Osborne’s first budget.
The new rate is due to increase in line with income tax – and the option of taking it up to the highest rate of 50 percent has not been ruled out. The change could start from June 22, or even be backdated to April 6, 2010
This will hit second properties as well as investment portfolios. The tightening up of the definitions around “private residence relief” which enables people to sell their main residence free if tax could pour salt on the wound for second-property owners.
Regarding pensions tax relief, we believe Chancellor George Osborne is likely to stick with the principles of the current proposals, but could ease some of the administrative complexities.
There’s also a chance that he could decide to replace the current proposals with a lower annual allowance which the pensions industry has been lobbying for as a simpler alternative.
There are also already signs that the government could remove the rule to buy annuities at the age of 75. However, it’s unclear whether this will be a high priority of the new administration.
We also believe we might also hear something regarding anti-avoidance measures on EFRBS and EBTs and hope that these would be specific measures targeted at particular avoidance acts not a blanket overall restriction.
Taxation of non-doms has been a hot topic in recent months particularly during the election campaign and the coalition has stated that it will review the taxation of non-doms despite the particularly complicated legislation introduced in the Finance Act 2008.
The UK still lacks a statutory residence test to provide certainty on an individual’s status – which could be introduced – and would affect significant numbers of foreign nationals in Uk as well as UK nationals abroad.
Also the current deemed domiciled rules bring a non-dom under the IHT net if they have been resident in the UK for 17 of the past 20 years. This could be shortened to the last seven out of nine years to align it with the test that is used for the remittance basis charge.
It is unlikely that there will be any change to the current inheritance tax (IHT) threshold of 325,000 pounds, much to the disappointment of many Tory backbenchers!
Picture Credit: Chancellor George Osborne arrives at the Treasury in Westminster, central London May 12, 2010. REUTERS/Andrew Winning