The Budget on the 8th July has the potential to be intriguing. This the first time that George Osborne will not have to take into account the views of the Liberal Democrats so we may find included measures which he has been itching to foist upon us for the last five years. Some of these we already know about because they were in the Conservative Party's manifesto for the General Election. However not all of them will be included this time around.
Some will almost certainly be present:
- The commitment to have legislation to prevent an increase in VAT, National Insurance contributions or income tax from rising in the next five years. This commitment is to be introduced in the first 100 days of the parliament.
- Increase in personal allowances during the lifetime of this Parliament. We actually already know quite a bit of what is promised as the March Budget announced increases in the personal allowance from the current £10,600 to £11,000 by 2017/18. We also know that the personal allowance will be increased to £12,500 by 2020 and we may get further information of how we move to this figure.
- Alongside the increase in personal allowances is the increase in the point at which 40% income tax will apply and changes to the National Minimum wage so that no one working for 30 hours a week on the national minimum wage will pay tax.
Other proposals will be present but may be subject to a consultation process and confirmation of when they will apply. In particular:
- A transferable allowance of £175,000 per person for main residences when they are passed to beneficiaries. This gives couples a potential allowance of £1 million (the current £325,000 nil rate band plus £175,000 each). This new allowance is to be tapered away from those leaving more than £2 million. A lot of potential complexity to our tax system may be the price of these proposals.
- The transferable allowance will be paid for by reducing the tax relief on pension contributions for people earning more than £150,000. Let's hope this will not turn out to be as complicated as similar provisions that were inflicted on us in 2009. The intention is, of course, to have a simpler approach but tax legislation has a habit of not delivering on the promise.
When will some of the proposals announced in the Budget become law?
Probably very quickly. Parliament will recess on 21 July and so Royal Assent of a Finance Act will need to be before then.
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