Pre-Budget Report initial reactions
Judging from Alistair Darling's speech on 24 November
Below are some initial comments from Richard Mannion, national tax director, on the pre-Budget report.
This is undoubtedly a set of Robin Hood initiatives, with income tax rises aimed at the better off to enable give-aways to low earning families. From April 2011, it appears that most earners (including middle and lower earners) will be caught by the 0.5% increase in NICs.
The tax rises for the better off could be substantial, an individual earning £140,000pa today is likely to see their tax bill increase by over £1200pa because of the restriction on the personal allowance. An individual currently earning £200,000pa will suffer a double whammy: the loss of their personal allowance will cost them over £2,400pa plus it appears the impact of the 45% income tax rate will cost them an additional £2,500pa.
SMEs
There was some welcome news for small businesses struggling to stay afloat at the present time, all of which could be outweighed if the government goes ahead with its ill-founded income shifting rules.
VAT
The main focus of the VAT reduction is to try and keep people spending. Whether a reduction of 2.2% (2.5% / 117.5%) is enough to encourage people to do so when they are also trying to reduce their credit card bills and other borrowing is more doubtful.
These comments are prepared before the full HMRC press releases become available. We will be providing further comment as the press releases become available.
For further information
Press Office at Smith & Williamson
- Kate Harrison, Tel 020 7131 4228
- Jess Koslow, Tel 020 7131 4264
- Alison Hayman, Tel 020 7131 4138
Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
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