The Chancellor of the Exchequer will make his Budget Statement to the House of Commons on Wednesday 23 March 2011 at 12.30pm.
George Osborne has promised a budget that will be ‘unashamedly pro-growth, pro-enterprise, and pro-aspiration'.
Experts say that the reality might be somewhat different.
These are some of their predictions;
Prediction 1 - Stamp duty
Stamp duty will rise from 4% to 5%, pushing up the cost of a £1 million property by £10,000.
‘If you are a higher rate taxpayer, in paid employment, planning to move house somewhere in the south east, you are particularly likely to feel the pinch,’ says David Kilshaw, chair of private client advisory at KPMG in the UK.
Prediction 2 - Income tax
The highest tax band threshold will fall to £35,000, from £37,400. The higher rate tax will therefore become effective at £42,475, down from £43,875.
There could be more changes to tax, though. ‘The government has said that they want to give at least three months’ notice on tax changes. But they may still announce ‘emergency’ measures on 23 March so we wouldn’t rule out any surprises on tax,’ says KPMG. The government has several times declared its intent to simplify UK taxation. While alignment of income and corporation tax years would be welcomed by most, it is not yet clear that this is something Osborne will deliver.
National Insurance will also rise by 1% for higher rate taxpayers.
Prediction 3 - Child benefit
Child benefit will be frozen, and then removed altogether, for higher rate taxpayers.
Prediction 4 - Fuel duty rise scrapped
Oil taxation is unlikely to rise further, as Osborne has hinted that he will scrap a planned increase of 1p per litre. Last week, Labour demanded a reversal of Osborne’s 2.5% hike in VAT on petrol, though the chancellor will be reluctant to give up any of the £700m bounty it is projected to raise. With recent events in the Middle East and Japan pushing up oil prices to untenable highs with uncertainty over Libya only exacerbating tensions, the chancellor will want to ease the burden on motorists.
Prediction 5 - Enterprise Zones
David Cameron has already announced that ten new enterprise zones will be created at the cost of £100 million over four years, each of which will be given tailored tax breaks and incentivised to drive economic growth. Where these zones will be, and how substantial their tax relief will be are yet to be revealed.
Prediction 6 - Corporation tax
The chancellor is currently phasing in a reduction in corporation tax rates, which will see them fall by 1% every year until 2014/2015, when tax rates for companies will land at 24%. As the tax rate is currently at 28%, this change could prove significant for many firms.
Prediction 7 - Small business taxation
The newly formed Office of Tax Simplification has put together research on recommendations for a new and more permanent tax regime for the UK’s smaller businesses.
Changes to the tax system for small businesses under the most recent Labour government were numerous and often in rapid succession, creating a lack of clarity. As the Office’s report was recently published, Osborne is expected to comment on it and nod towards changes to that end, according to a report from RSM Tenon. Specific details remain to be seen, however.
Predcition 8 - Large business taxation
HMRC has stated that developing a robust relationship with large businesses is a priority, though there has been little information on how this will be achieved. There could be anything from fewer tax increases to targeted legislation to allow large companies to continue to view the UK as a profitable place for trading.
Prediction 9 - Investment tax relief
Osborne has already confirmed his intent to hang on to some form of investment tax relief, though the form and degree such measures will take is unclear.Capital expenditure outside enterprise zones will need some kind of boost, and Osborne is likely to elaborate in the budget.
Prediction 10 - Low Value Consignment Relief
Low Value Consignment Relief is a policy designed to encourage trade, which allows UK customers to pay no VAT on goods with a value of £18 or less, as long as they are imported from outside the EU. As online sales have grown, this legislation has inadvertently protected a large number of non-EU businesses, and costs the Exchequer somewhere in the region of £130 million each year.