Budget Predictions

Whether it is media hype or genuine interest, the public seem addicted to professional attempts at second guessing the Chancellor of the Exchequer each year.

This column is actually going to comprise a mixture of serious predictions, the odd minor flight of fancy and some earnestly desired wishes.

Very few accountants are allowed to give investment advice and yet they will commonly prognosticate about the Chancellor's pronouncement. This might be viewed as disingenuous since the immediate result of such guesswork (and there is no other term for it) is a mass of investments or withdrawals, as appropriate. That will certainly be a likely outcome in 2013, with guaranteed changes to income tax rates.

Therefore, before starting , it is worth stating that this Nostradamus is not permitted to give investment advice, would not dream of doing so and if he did, would get it very badly wrong.

Having made the safety statement, your columnist is absolutely confident that the biggest rabbit that George Osborne is going to pull from his Budget hat in 2013 is a 40% top rate of income tax.

That should set many taxpayers and advisers thinking (but sadly nobody at Goldman Sachs), although the reason for this confidence is the minimal fiscal impact that it has and the maximum effect on the psyche and morale of Conservative backbenchers.

It is now also possible to deliver some further confident predictions about changes in addition to the 40% top rate of tax.

It might well be combined with an unexpected hike in the personal allowance to £10,000 from 6th April, ensuring that the poor as well as the rich benefit from this Budget. At the same time, the threshold for the higher rate of tax will inevitably be squeezed considerably further.

There is also every chance that corporation tax will be unified for all companies at 20% from this April (or possibly next).

Further, air passenger taxes could be halved, and fuel duty frozen, though the emissions thresholds for car tax benefits might be forced even lower.

Readers will be asking how all of this is going to be funded? It would be nice to imagine that the inevitable boost to our austere economy would provide the measure of self-correction required.

The joker in the pack is abuse and avoidance. None of us has a full understanding of how the introduction of the GAAR might help the public finances but it should do so to some degree.

Similarly, the decision of Barclays to close down its tax loophole arm and the focus of the House of Commons' Public Accounts Committee on the Big Four and their activities might also lead to an increase in the tax take.

However, the economy may just require a little more help and this could either be provided by increasing National Insurance Contributions or VAT. Since the former is easier to hide, it must be the better bet, although books and published material as well as horsemeat could find themselves subjected to VAT and we should never forget that while 20% seems terrifying, some of our European neighbours pay anything up to 27%.

If all goes to plan, at long last, Mr Osborne might also be able to get a real grip on tax simplification. In particular, he could just shock us all by abolishing capital gains tax on any asset held for longer than (let's say) five years.

The change that seems most unlikely, despite the fact that it is much feted by at least one of the coalition parties, is the mansion tax.

Last and almost certainly least, a new tax will be introduced on flying pigs such as some of those in this article, chargeable at the penal rate of 50%.

It would be great to tap into readers' own views, especially any in the know. We have closed down the overseas call centre and my final hearty wish is that dear George would do the same to all of his. Therefore please respond in the usual way.

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mr. mischief's picture

My prediction    1 thanks

mr. mischief | | Permalink

If Boy George screws this Budget up like 2012, he can safely be removed from the Minsiterial payroll in the first RTI submission of the new tax year!

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