PM-in-waiting tries a Budget balancing act

Brown daren't raise taxes - but he could still close loopholes

In 10 days' time, Gordon Brown is due to unveil his 10th Budget. And, prime ministerial ambitions very much in mind, his top priority will be his relationship with the tax-paying electorate.

"As this could well be his last, the Chancellor will look to deliver a Budget which he feels confident will help him as a new prime minister," says Ian Luder, tax partner at accountants Grant Thornton.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, agrees. "I think he will minimise tax rises where he can - leaving these to his successor," he says. "He will want to show he is a man of the people, and go out on a high."

The first Budget of a new parliamentary term is often an occasion to announce unpopular measures. But within the financial services industry there is a strong feeling that, this time, nasty shocks such as an increase in national insurance contributions or the standard rate of VAT are unlikely.

"Instead, the Budget could provide the Chancellor with the opportunity to pursue some of his current hobbyhorses - such as green policies and [a clampdown on] tax avoidance," says Victor Dauppe, tax principal at accountants MacIntyre Hudson.

That said, the Chancellor's spending programme and subsequent budget deficit mean he will need to boost tax revenues.

Below, we take a look at the Chancellor's options, what the tax specialists expect him to do, and what they would like him to do.

Tax avoidance

New rules demanding that accountants disclose details of tax-avoidance schemes such as onshore and offshore trusts have already been announced, and will be extended from 6 April, the start of the new tax year.

Mr Roy-Chowdhury predicts a widening of these measures to take in areas such as stamp duty and inheritance tax. Those most affected are likely to be people with comfortable incomes, rather than the super-rich.

Savings

Individual savings accounts (ISAs) and the child trust fund (CTF) could be enhanced in the Budget.

Last year, the Chancellor announced that the £7,000 annual limit for investing in tax-free ISAs would stay in place until 2010. But there are calls for this allowance to be extended beyond this date, and also to be raised.

Speculation is also rife about the Savings Gateway, a pilot scheme under which the government matches savings accumulated by those on low incomes.

"Is this going to be taken forward or quietly dropped?" asks John Whiting of accountants PricewaterhouseCoopers.

The Chancellor may also decide to put a figure on proposed CTF payments to be made when a child reaches the age of seven.

Pensions

On the question of self-invested personal pensions (Sipps), independent financial advisers (IFAs) and pension providers are desperate for the Chancellor to finalise details of any further restrictions on investors. In December, Mr Brown horrified the industry when he did a U-turn and decided that exotic investments such as holiday homes could no longer be put into Sipps.

A-Day - on 6 April - will bring about the biggest changes for years in the UK's pensions regime, including greater flexibility for those taking benefits from pension schemes. From A-Day, people can opt to bequeath part of their pension savings to their families - but the inheritance tax (IHT) implications are still unclear, and tax specialists will be looking to the Chancellor to provide answers.

VCTs

Investors are nervous about changes to tax rules surrounding venture capital trusts, which back small unquoted companies or start-ups. Since 2004, VCT investors have received 40 per cent income tax relief, but this is due to end on 5 April. Many experts, including Grant Thornton's Mr Luder, expect it to revert to 20 per cent.

Trusts

Draft legislation has already been published on modernising the taxation of trusts - often set up by grandparents for grandchildren.

Andrew Swallow from IFA Swallow Financial Planning warns that family trusts could be dealt a "massive tax hit".

The environment

Could Mr Brown use this Budget to push a green agenda?

Mr Whiting says: "We may see small moves towards an environmentally based tax system - such as a rise in air passenger duty."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
music

News
Russell Brand at an anti-austerity march in June
peopleActor and comedian says 'there's no point doing it if you're not'
Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Voices
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Arts and Entertainment
Sister Cristina Scuccia sings 'Like a Virgin' in Venice
music

Like Madonna, Sister Cristina Scuccia's video is also set in Venice

News
i100
Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004
music

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say

News
news

Endangered species spotted in a creek in the Qinling mountains

News
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Pensions Administrator

    £23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

    Corporate Actions Administrator / Operations Administrator

    £25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

    Customer Service Executive / Inbound Customer Service Agent

    £18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

    ASP.NET Web Developer / .NET Developer

    £60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

    Day In a Page

    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Let's talk about loss

    We need to talk about loss

    Secrecy and silence surround stillbirth
    Will there be an all-female mission to Mars?

    Will there be an all-female mission to Mars?

    Women may be better suited to space travel than men are
    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album