Tax hikes expected for the better off

Chancellor Alistair Darling is widely expected to announce a raft of tax increases for the better off when he delivers his Pre-Budget Report on Wednesday.





With the Government facing an estimated £175 billion budget deficit, Mr Darling's speech is expected to contain several revenue raising measures.

But with a general election looming, he will have to tread carefully to avoid alienating Labour supporters.

As a result, capital gains tax (CGT) and inheritance tax are thought to be the most likely taxes that he will increase, while income tax for higher earners could also be raised.

Geoff Tresman, chairman of Punter Southall Financial Management, said: "I believe that the Chancellor has no real choice but to signal an increase in taxation and I think one area where he can do so, without sidelining any of Labour's traditional support, is through capital gains tax."

CGT is currently charged at a flat rate of 18 per cent, following changes announced in 2007, on gains of more than £9,600 made in any one tax year when an asset is sold. However, as people's main homes are usually exempt from the tax, it is generally only paid by the better off.

It is thought that Mr Darling may increase the CGT rate to 25 per cent or even 30 per cent, while some commentators think he could go further and raise it to 40 per cent, in line with the 40 per cent income tax band.

CGT receipts have fallen sharply this year, with HM Revenue & Customs expecting to collect just £2.22 billion through the tax in 2009/2010, well down on the £7.85 billion taken in during the previous year, when 350,000 people paid CGT. An increase in the CGT rate would help to offset some of this fall.

Inheritance tax is also widely tipped to be an area the Chancellor will turn to in a bid to raise extra revenue.

It is currently charged at 40 per cent on all assets worth more than £325,000, although anything left to a spouse or civil partner is exempt, while married couples and civil partners can also transfer any of their unused allowance to their partner on their death.

KPMG predict Mr Darling will hit wealthy families with the introduction of a new 50 per cent rate on estates worth more than £1 million.

He could also double the length of time for which people have to live after making a gift in order for it to be exempt from the tax from seven to 14 years, to make it harder for people to reduce the value of their estates.

Chartered accountants Blick Rothenberg is also expecting a new 50 per cent inheritance tax band, although they predict this will apply to estates worth more than £1.5 million.

It also thinks the Chancellor may put a cap on the value of business assets and agricultural land that are exempt from the tax - a move which would prove unpopular with farmers and family firms.

A combination of tax and VAT hikes, rising oil prices and an expected return to more normal mortgage rates will bring the biggest squeeze for decades on the spending power of the rich and middle classes next year, according to research by PricewaterhouseCoopers for The Independent.

But researchers also said the worst-off will see their living standards rise in 2010, with a single mother on about £10,000 a year 2.3 per cent better off.

High earners have already been hit hard by the Chancellor in this year's Budget, when he announced plans to introduce a new 50 per cent income tax band for those earning more than £150,000 from April next year, as well as scraping personal allowances for people earning above £100,000.

Mr Darling also said pensions tax relief would be reduced for those on more than £150,000 from April 2011.

One way in which the Government may squeeze more money out of the better off could be through reducing the level at which the new 50 per cent income tax rate kicks in to £110,000.

Chris Sanger, Ernst & Young's head of tax policy, thinks the Chancellor may go further and introduce a 60 per cent income tax rate on people earning more than £500,000.

He said: "This would be a strong statement in relation to high salaries and could raise in excess of £2 billion."

There may also be a number of modest give-aways in the Pre-Budget Report, such as an extension of the current stamp duty holiday on properties costing up to £175,000, as well as measures to help the less well off, particularly pensioners.

Mr Darling is also expected to announce modest increases to tax allowances, which rise in line with Retail Prices Inflation from April, despite the fact that RPI is currently negative.

News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
News
people

Kirstie Allsopp has waded into the female fertility debate again

Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
News
people
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
people
News
peopleStella McCartney apologises over controversial Instagram picture
News
Gillian Anderson was paid less than her male co-star David Duchovny for three years while she was in the The X-Files until she protested and was given the same salary
people

Gillian Anderson lays into gender disparity in Hollywood

Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
Arts and Entertainment
Swiss guards stand in the Sistine Chapel, which is to be lit, and protected, by 7,000 LEDs
art

The Sistine Chapel is set to be illuminated with thousands of LEDs

Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsA Welsh town has changed its name - and a prize if you can notice how
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Sport
Ronaldinho signs the t-shirt of a pitch invader
footballProof they are getting bolder
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.

iJobs Job Widget
iJobs General

Trainee Recruitment Consultant

£20000 - £25000 per annum + Uncapped Commission, 1st yr OTE £30-£40k : SThree:...

Middleware Support Analyst

£45000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Senior Java Developer/Designer

£400 - £450 Per Day: Clearwater People Solutions Ltd: My client are looking fo...

Domino Developer and Administrator

£40000 - £45000 Per Annum + benefits: Clearwater People Solutions Ltd: Domino ...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?