The coalition between the Conservatives and Liberal Democrats has now been in power for around three weeks and they have certainly wasted no time in signalling where they plan to make changes.
Amongst the plethora of announcements, including the formal Coalition document, have been many that will impact on not only your day to day financial affairs but also your longer term planning, whether this is savings, investment or pension planning.
George Osborn’s first budget will be held on 22nd June, and will no doubt contain many measures to help reduce the record level of the deficit, however many announcements have already been made, we thought we would round these up for you.
- The main burden of deficit reduction to be borne by reduced spending rather than increased taxes
- The future of Labour’s planned tapering of tax relief on pensions for high earners was omitted from the document
- The 1% employer NI increase from 2011 is to be abandoned but the 1% employee increase is to remain
- The Child Trust Fund will be discontinued
- Tax credits will be restricted for high earners
- An independent commission is to be established to review the long term affordability of public sector pensions, while protecting accrued rights
- The earnings link for the basic state pension to be restored from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%
- The personal allowance for income tax should be increased in order to help lower and middle income earners. The parties have agreed to announce in the first Budget a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes. They have also agree to a longer term policy objective of further increasing the personal allowance to £10,000.The Conservative plan for a married couples tax break will be implemented and will take effect next year
- The Coalition have agreed that the above should take priority over other tax cuts, including cuts to Inheritance Tax
- Furthermore the Coalition have agreed to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities. Rates for CGT (Capital Gains Tax) on non-business assets maybe increased closer to the 40% higher rate of income tax. The CGT annual exemption could be reduced
- Tax avoidance will be clamped down on all efforts will be made to do so, including detailed development of Liberal Democrat proposals
- The Coalition have agreed to rule out joining the European Single Currency during the duration of this parliament
- The default retirement age will be abolished
- A review will be carried out to set the date at which the state pension age starts to rise to 66, although it will not be sooner than2016 for men and 2020 for women.
- Compulsory annuitisation at age 75 will be abolished
We will bring you further details when they available, however if you are worried about how the changes will affect you and want advice do not hesitate to contact us by clicking here.