Pre Budget Report or Pre Election Announcement?

by Geoff Hill

Today’s Pre Budget Report could well prove to be Alistair Darling’s last outing as Chancellor. Only history will tell, but it was clear that we were delivered a mixture of Pre Budget future pain and a Pre Election statement that deliberately left some areas untouched – no doubt with a view to winning votes at the impending election.

We had expected increases in capital gains tax but this area was entirely untouched. VAT is due to return to 17.5% as preannounced– with the key thing not being announced is any further rise in VAT. The planned 1% rise in corporation tax is also being deferred a further year, so this is good news and remains at 21% for those smaller companies making profits.

Now comes the inevitable pain. Rates and allowances were frozen largely across the board, so in real terms - after inflation is taken into account - taxes will rise for most people. There will also be a further 0.5% National Insurance increase for most employees, but not until 2011. Further tinkering with pension contributions and tax rates for higher earners makes specialist advice on this area crucial. City bankers wondering whether to take that discretionary bonus or not would be better off staying at their after-office party in the city than reading the newspapers following the announcement of a new 50% banker bonus tax.

Will any of this matter? Well, we will have a General Election before next year’s Finance Act makes most of these changes law, so further changes seem inevitable. Those who wish to escape all of this may be well advised to head for the hills in their Electric Cars – now announced to be a tax-free benefit for employees!

If you would like to discuss how you could be affected by the changes announced, please contact your usual Ward Goodman contact or me and we will be pleased to help.

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Ward Goodman please contact 01202 875900