Any changes will be layed before Parliament in an Emergency Budget which is expected to be delivered by the new Chancellor of the Exchequer George Osbourne within the next 50 days.
Income Tax And National Insurance
One of the main Liberal Democrat taxation proposals accepted by the Tory negotiating team was a “substantial increase” in personal tax allowances to benefit low and middle-income workers from April 2011.
It was announced that to fund this, the coalition will be keeping part of the planned National Insurance rise – the employee contribution element – in place and an increase in capital gains tax on non-business assets.
The result of this will see anyone earning more than about £20,000 having an increased NI liability from April 2011.” The abandonment of the increase in employers NI contributions will save businesses an estimated £3bn annually.
For individuals the combined changes to NIC and the proposed increases to personal tax allowances should see someone earning £20,000, who would have been expecting a modest increase in tax and NI will now have a saving of around £700. Those earning £25,000 will have a saving of around £670, and £30,000 around £600. It is thought that anyone earning up to around £90,000 will see a combined saving, although all these estimates will depend on the exact rates and bands that will need to be introduced and, at present, no real time scale for the changes to personal tax allowances has been suggested.
Capital Gains Tax
The coalition is thought likely to adopt the Lib Dems’ proposals of raising the rate of capital gains tax and streamling it with income tax rates. As a result, the top rate of CGT will be at least 40%.
How soon this would be introduced and whether it would be restricted to non business assests is unclear at present.
One of the largest tax concessions made by the Tories is accepting that plans to exempt estates worth up to £1 million from inheritance tax are unlikely to be implemented within the lifetime of this Parliament.
Child Trust Fund
The coalition Government will implement original Tory proposals to restrict contributions to child trust funds to poorer families. “The parties agree that reductions can be made to the child trust fund.
Benefits and Tax Credits
The coalition have agreed that reductions in the levels of tax credits for higher earners could be made.
Plans have been annouced to end all existing welfare to work programmes and replace them with a single scheme to help all unemployed people get back into work. Those claiming Jobseeker’s Allowance and facing the most significant barriers to work should be referred to the newly created welfare to work programme immediately, not after 12 months, as is currently the case.
If you would like further advice on any of the planned changes from the coalition Government, call the TaxWise Advice Service on 01455 852570 and one of our trained specialists will be happy to help.