Budget 2012- what's in store?
The excitement is too much to bear isn’t it. Exactly one week from today, the country’s favourite current Chancellor will stand up and deliver his 2012 Budget speech to the expectant nation. With reports that the UK deficit has been reduced quicker than anticipated, and rumours of new taxes and slashing of reliefs, will there be an extra something in his little red box for the likes of you and me?
Of course, the exact contents of the Budget box are a closely guarded secret until the big day, but there are some things we already know. For example, next year’s standard personal allowance will go up to £8,105 (from £7,475), which is lovely, but the income at which the 40% tax rate kicks in has, at the same time, been lowered from £35,000 to £34,370. This means that individuals will still become higher rate taxpayers with a total income of £42,475. Details of all the rates have already been published on HMRC’s website.
We also already know that fuel duty will go up by 3.02ppl on 1 August 2012. This increase was originally scheduled for 1 January 2012, and while it is possible that it could get deferred again, noises from the Treasury suggest this is unlikely, regardless that we already have one of the highest rates of tax on fuel in the EU.
Speculators are also convinced that tax relief on pension contributions for higher rate taxpayers is on the way out. Given how much these rules have been messed with in recent years, this would surprise no-one, although the likely effect on the already-unpopular pensions market would seem to be at odds with the Government’s need for people to save privately for their own retirement.
And there will be some announcement on Child Benefit. George’s ill-thought-out plans have caused Concern and Outrage in middle income swing voting households, and politically, that needs to be addressed sooner rather than later.
But these things are not thrilling tax teasers to tantalise the taxpayers, so surely there will be some surprises in George’s box? Undoubtedly so, but here are a few of the more outlandish ideas that have been floating in the air around Westminster. Funnily enough, most of the least likely are LibDem ideas…
Mansion tax is a stalwart curmudgeon, much like Vince Cable. He really likes it, and has hinted that some form of Mansion Tax would be the only way an abolition of the current 50p tax rate would be tolerated. So far, three possible forms of wealth taxation have been suggested- a national tax on the value of expensive properties, worth over say, £1m or £2m; a land tax, based on the acreage of homes; or a super-tax council tax banding. Given that none of these options are particularly attractive to wealthy, land-owning Tories, this one really is the dark horse. As for the 50p rate of tax itself, the jury is out on whether it is actually making money- the IFS think not, but the Treasury’s own figures suggest it’s a nice little earner, and it would probably be impolitic, at this stage, to remove it just yet.
And even Nick Clegg seems to be distancing himself somewhat from Vince’s baby. His new wheeze is the Tycoon Tax, where everyone, millionaires included, must pay a minimum rate of income tax, possibly 20%, thereby circumventing any clever tax planning that only millionaires can afford. Lib Dem millionaire tycoon Lord Oakeshott denounced the idea as “unworkable”.
And the last of the strange-but-possibly-true is the widely accepted suggestion that George is going to mortgage the country indefinitely. He describes the plans for new 100 year, or even perpetual, Government bonds as “locking-in” low interest rates. Critics suggest that he is merely condemning our grandchildren to a life of repaying our 2008 debts, and wonder, if interest rate are likely to rise in future, who on Earth would be daft enough to want to buy a bond fixed at a low rate of return.
Answers on a postcard.