Tax Take to Carry On Sneaking Up

Strategic Insights -

A budget specialist from leading accountancy firms suggests a "pick-pocket budget" is likely on November 29, with tax take expected to increase from most taxpayers. The chancellor will announce a further cut in mortgage-interest relief at source (MIRAS) from 20% to 15% this year, and a subsequent cut to 10% in the following year. The married-couple's allowance relief rate is also expected to drop to 15% in April. John Battersby from KPMG Peat Marwick hopes that ordinary personal allowances might be raised in line with inflation this year.

Key Takeaways:

  • The threshold for higher-rate tax is expected to remain unchanged at £23,700 (taxable income) since April 1991, despite inflation.
  • The basic single-person's allowance has been frozen since April 1993, but may be indexed in this year's budget.
  • Higher earners may face a decrease in their tax threshold, with the overall picture of little change, but potentially for the worse.
  • Experts believe that there is little room for manoeuvre in this year's budget, given the trend of "infilling" of the last two or three budgets.
  • Clive Tulloch from Coopers & Lybrand suggests that capital-gains tax might be radically changed, potentially introducing a new tapering relief system.
  • There is a possibility that extra relief might be given for holders of shares in unquoted companies.
  • The dead cert in this year's budget is the abolition of the employee-bonus scam, with bonuses being taxed for employees, but companies finding ways to avoid National Insurance contributions.

Statistics:

  • The threshold for higher-rate tax has remained unchanged at £23,700 (taxable income) since April 1991.
  • The basic single-person's allowance has been frozen since April 1993.
  • The pending cut in mortgage-interest relief at source (MIRAS) from 20% to 15% this year, and a subsequent cut to 10% in the following year.
  • The married-couple's allowance relief rate is expected to drop to 15% in April.

Sources:

  • The Sunday Times, 1994
  • KPMG Peat Marwick
  • Arthur Andersen
  • Ernst & Young
  • Grant Thornton
  • Coopers & Lybrand
  • Touche Ross
  • The Sunday Times, 1994
  • John Battersby, head of personal-financial services at KPMG Peat Marwick
  • David Marks of Arthur Andersen
  • Richard Rees-Pulley of Ernst & Young
  • Mike Warburton of Grant Thornton
  • Clive Tulloch of Coopers & Lybrand
  • Maurice Parry-Wingfield of Touche Ross