Ahead of next week's much-anticipated Budget, KPMG reveals what it expects to emerge from Alistair Darling's old red briefcase.
Allowances and thresholds
Most personal allowances are anticipated to continue at the current levels. There could be modest increases of perhaps £500 in the higher allowances for those over 65.
Effect of 50% rate
At present, higher-rate tax payers who donate income to charities under Gift Aid receive relief at 40% if they have sufficient income taxable at 40%. In December 2009 the Government published research it had commissioned. This looked at a number of options, but the effect of any would be to deny full relief to those who pay tax at higher rates. While the Government has announced no decision, the Chancellor may indicate their preferred option.
KPMG think it is possible there could be increases to inheritance tax. These could take the form of a higher 50% rate on estates worth over £1m for example and, in line with longevity, an increase in the time required for lifetime gifts to become exempt from 7 years to say 14 years. Business Property Relief could be restricted so that this very valuable exemption from inheritance tax applies only to smaller companies that currently qualify for EIS and other reliefs.
Equitable liability arises where a taxpayer, often for reasons connected with ill health or unfortunate family circumstances, falls behind with making tax returns. The practice had been planned for withdrawal, but the Government has indicated that they will legislate to enable the practice to be retained and KPMG anticipate a further announcement or draft legislation in this regard.
Although there is already anti-avoidance legislation in the tax area, KPMG anticipate further measures, and such legislation is most likely to be aimed at preventing income returns being taxed as capital. Another area for action is likely to be to follow up the consultation paper issued in December 2009 on "Tackling Offshore Tax Evasion". New higher penalties for such offshore evasion as well as a new requirement to notify HMRC of bank accounts in certain jurisdictions with balances over £25,000 are expected.
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