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21 February 2012Press Releases
George Osborne has limited scope for manoeuvre when the budget is given on 21 March as the economy has not grown as the Government had hoped, warns Stephen Barratt, Private Client Tax Director at accountants and business advisers James Cowper Kreston.
Radical change is therefore unlikely and areas most likely to be in line for Treasury attention are personal tax allowances and the so called ‘mansion tax’. According to Stephen we can also reasonably expect the Chancellor to make significant changes to Inheritance Tax and the Child Care Voucher scheme.
Stephen Barratt commented: “The mansion tax has been mooted for some time and is an election pledge for the Liberal Democrats. The idea is that properties worth over £2million face an annual charge. This would be a new departure, but with recent talk of the Government looking to encourage older people living alone in large properties to downsize, it is perhaps more of a realistic possibility than it has been before.
“Also of interest to older people, the Office of Tax Simplification - which was set up to see what taxes should be changed, abolished or enhanced - has recommended a review of Inheritance Tax. This is due to start this year and whilst no detailed announcements are expected, the Budget may give us some sense of where the Chancellor would like the review to focus, with the detail following in a future budget.”
Day-to-day family finances could see good news in respect of personal tax allowances and Child Care Vouchers.
Stephen said: “The personal tax allowance rises to £8,105 from April 2012 and the Government has an ambition for it to reach £10,000 during the parliament, so we may see an announcement of another increase greater than inflation from 2013.
“Another idea that’s been suggested is whether the Child Care Voucher scheme, which gives a tax break to working parents, could be extended to cover the self-employed and to domestic help beyond Ofsted registered nannies. Both of these initiatives would help achieve ‘fairness in the middle’ with parents who might like to return to work.”
Concluding, Stephen added that he is also optimistic that the higher rate tax relief on pension contributions will continue, but anybody hoping for a reversal of Government policy on child benefit or the higher tax rate is less likely to be in for a pleasant surprise.
“From April 2013 child benefit will be abolished for those households with one person earning more than £42,475. This is not popular amongst the ‘squeezed middle’ but is unlikely to be reversed unless the higher rate of tax goes up. The 50% higher tax rate is also likely to remain.”