-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

-Julia Whittle is principal and head of international, Punter Southall Financial Management

We would certainly expect Chancellor Alistair Darling to use this budget to make a strong statement ahead of the general election to try to repair public confidence, but this may be difficult without making the situation worse.

There has been huge speculation that the Chancellor will increase the rate of capital gains tax, from 18 percent to something much closer to the new 50 percent top rate of income tax but this is unlikely to yield huge revenues and would add to the hit on high earners.

Marginal tax rate increases would probably be a bridge too far but some tinkering around the edges is likely– for example tax disclosure arrangements could well be extended to cover “income to capital” schemes and maybe extending HMRC powers in relation to offshore accounts.

Rumours have been rife about tax free cash being taken away from pension scheme benefits. However, this is unlikely due to the hugely damaging effects of retrospective taxation.

Inheritance tax changes are unlikely for this budget although means testing for child benefits could be slipped through.
Venture Capital Trust/Enterprise Investment Scheme relief could be targeted but certainly wouldn’t send out the right message for a Chancellor supporting economic recovery.

Finally, National Insurance was hit last time so Darling probably won’t try another rise quite so soon, though VAT is always a target.

Don’t forget the pre-announced tax increases and changes:

•    The 50 percent tax rate commences on 6 April;
•    Personal allowances are withdrawn for those with income above 100,000 pounds;
•    Fuel duty increases by 1p per litre above indexation on 1 April;
•    Landfill tax rises by 8 pounds per tonne;
•    The furnished holiday letting rules are abolished from 6 April, so that owners will no longer be able to set losses against other income;
•    Fuel benefit increases, for those who receive fuel for personal motoring. For vans, there’s a 10 percent increase to 550 pounds and for cars the multiplier rises from 16,900 pounds to 18,000 pounds;
•    The inheritance tax threshold is frozen, at 325,000 pounds instead of increasing as originally planned;
•    The Community Infrastructure levy commences on 6 April 2010. It’s a mechanism that allows local authorities to levy charges on new property developments, to finance local infrastructure.