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?
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
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

    Project Manager (HR)- Bristol - Upto £400 p/day

    £350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

    Graduate / Trainee Recruitment Consultant - IT

    £25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

    HR Business Partner - Banking Finance - Brentwood - £45K

    £45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

    PA / Team Secretary - Wimbledon

    £28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

    Day In a Page

    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
    How live cinema screenings can boost arts audiences

    How live cinema screenings can boost arts audiences

    Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
    Shipping container hotels: Pop-up hotels filling a niche

    Pop-up hotels filling a niche

    Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
    Native American headdresses are not fashion accessories

    Feather dust-up

    A Canadian festival has banned Native American headwear. Haven't we been here before?
    Boris Johnson's war on diesel

    Boris Johnson's war on diesel

    11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
    5 best waterproof cameras

    Splash and flash: 5 best waterproof cameras

    Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
    Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

    Louis van Gaal interview

    Manchester United manager discusses tactics and rebuilding after the David Moyes era
    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz