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Osborne's balancing act

The Chancellor of the Exchequer will be under pressure to stimulate growth and decrease state spending

6 July 2015

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George Osborne will deliver his emergency summer budget on Wednesday 8 July. The chancellor has much to live up to; the Tories have an obligation to deliver on their pre-election promises and tax carrots, and continue to drive down state expenses to achieve a budget surplus.

Here we go through some of the policies likely to affect private clients and have already been leaked to the public, and those which were promised through the party manifesto and on the election campaign trail.

Inheritance tax

The inheritance tax threshold for the family home is expected to rise from £650,000 to £1m from April 2017. The move will fulfil a key party pledge made in the Conservative manifesto.

Details on how this would work in practice are very limited at the moment.

Tax avoidance

We are likely to see further measures to combat aggressive tax evasion. This is expected to target both private individuals as well as multinational corporations.

George Osborne announced in his last budget under the coalition in March 2015, that there would be an increase in the number of accelerated payment notices (APN) issued on disputed tax.

However Ingenious Media Film investors won the right to challenge the legitimacy of APNs in February 2015, on the grounds that the power was retrospective and penalised them for schemes they had entered into before the power came into force.

In a recent case heard in the Court of Appeal, there is potentially some indication as to which way the court may find.

A group of taxpayers lost their appeal against HMRC after they had entered into a stamp duty land tax avoidance scheme before the changes of the Finance Act 2012 came into effect. They appealed on the grounds that the law was retrospective, but lost.

The diverted profits tax, or 'Google tax' has been in force since April and the chancellor will probably deliver more details on the amount of money this will raise for the treasury, and the number of companies which have already been targeted.

Capital gains tax

The higher rate of capital gains tax (CGT) is very likely to increase from its current 28 per cent rate. It is far lower than the 45 per cent income tax rate paid by the highest earners, and Osborne is likely to attempt to level the two. However a jump to anything in the region of 40 per cent is unlikely at this point.

Income tax, VAT and National Insurance

The election campaign had all three major parties promising a 'triple lock' on income tax, VAT and national insurance, and promising not to tweak any of them. The Tories are expected to keep this promise and leave all three unchanged.

45p top tax rate

The top rate of tax is not expected to drop from 45 to 40p in this budget, however the chancellor may give some indication as to the timeframe in which this change will take effect.

Non-doms

Britain offers some of the most favourable tax and residency treatment for non-doms in comparison to Europe and America, and the chancellor is likely to erode some of this.

Children of non-domiciled (non-doms) UK resident individuals are likely to lose their right to inherit their parent's non-dom status. Details of the residency status this would leave the children in are expected in the budget.

 

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Tax & Wealth structuring