Taxes always go down before a general election.
Reducing tax for the wealthiest isn’t politically popular, so with a general election just around the corner, it is unlikely that we will see a reduction in the highest tax rate. There isn’t much risk that this will drive higher-earning voters into the arms of the opposition, because the Labour party has already said that it is committed to putting the 45% top rate of income tax back to 50% if they gain power.
At the other end of the scale, this Parliament has seen unprecedented increases in the personal allowance, taking many of the lowest paid out of the tax net altogether, and reducing the tax burden for many others. Arguably there is more to be done in terms of similarly raising the threshold at which national insurance kicks in, At present, anyone earning over around £8,000 a year is liable to national insurance contributions, although NICs for under 21s will be abolished from April.
The real fight is probably over the votes of individuals in middle income groups, who have been particularly affected by the repeated reductions in the level at which the 40% rate begins to bite. This is currently just short of £42,000, meaning that many moderately paid earners are now paying tax at the higher rate.
Another area that has been in the news recently is the question of tax evasion and avoidance. The present government has probably done more than any previous administration to address these areas, but it is always slightly on the defensive because of the traditional association of the Conservative party with business interests. The Chancellor may well want to announce some new initiative to take the wind out of the sails of the opposition, but recent changes, plus those coming into effect in April, are so far-reaching that it is difficult to see quite what options are left to him.
No doubt there will be some technical changes as well, but they are probably not going to be at the top of the Chancellor’s mind. He needs something eye-catching. Perhaps the only predictable thing about the Budget is that it’s sure to have some surprises in it.
Please check the Moore Stephens website on the day of the Budget for as it happens commentary.
Tax - Business
Tax - Private client