BUDGET 2012: What to expect
It’s been a week of headlines dominated by Budget leaks and furious debates between MPs - read on to find out what to expect when George Osborne kicks off at 12.30 today.
We’ll be reporting live on Budget 2012 as it happens but here’s what we’re already expecting.
It’s likely that the current 50p rate of income tax for those earning more than £150,000 will be cut to 45p from April 2013.
The Chancellor has already been quoted as saying the 50p rate of tax has failed to bring in as much money as the previous government hoped it would when it implemented the higher rate in 2010.
A cut to 45p would send out a positive signal to businesses and overseas investors – something which should arguably help boost inward investment in the UK and help rebuild growth.
But the flipside is likely to be a placebo for the Liberal Democrats who see the move as giving back to the people who need it least.
A mansion tax on homes worth more than £2m has been widely mooted by Vince Cable and would be a political concession for the Tories to help smooth Coalition relations. In reality, out of the 27m homes in this country a mansion tax would hit just 50,000 people – the vast majority of whom will be the same people benefitting from a cut in income tax. It seems unlikely this will be given the green light.
The other thing that’s looking more and more likely to make an appearance later today is stamp duty.
Osborne has openly pledged to crack down on the loopholes that see the wealthy construct ways (offshore trusts for example) to avoid paying the tax.
Deloitte has said that despite an uptick in HMRC’s compliance work on stamp duty, enforcing a crackdown on many of the loopholes may be tricky in practice.
Phil Nicklin, real estate tax partner at Deloitte, points out it is still possible to avoid stamp duty on future sales by buying a property into a company.
In his view the only practical way to aid enforcement would be to impose a reporting duty on estate agents.
As a result Nicklin believes the government will introduce some form of stamp duty charge on the transfer of land rich companies holding UK residential property later today.
At this stage, there is no suggestion that the charge will be extended to the commercial sector.
Meanwhile a crackdown on the social benefits culture could offer advisers another reason to pick up the phone to clients.
If the government raises the income tax threshold to £10,000 as it’s promised to do by the next election, experts say this could boost people at the lower income end of the scale more meaningfully than the stamp duty holiday has done.
The reasoning is those on lower salaries are typically those struggling to buy first-time and they’ll end up with more money in their pockets.
But a simultaneous squeeze on disposable incomes driven by cuts in tax credits for middle income families means less money put away for a rainy day and more reason to take another look at protection cover.
Some have called for the government to commit lenders to targets in the mortgage market and while that might be nice, it’s not looking too likely.
The fact is bar tax tinkering the housing market has probably had its lot in last year’s housing strategy and the mortgage indemnity guarantee.
The most we can realistically hope for is that the income support for mortgage interest scheme isn’t abandoned and is potentially extended beyond January 2013.
The scheme allows unemployed borrowers with mortgages up to £200,000 to claim up to 100% of their mortgage interest payments after 13 weeks without a job.
Cystal ball gazing is only ever best guesses so keep up to date with what the Chancellor has to say from 12.30 today and remember to log back on for live Budget 2012 coverage.
- What made the nationals: Sponsored by PressChoice
- Which warns of shaky consumer confidence
- Montello signs up to NACFB
- Broker banned over failure to spot fraud
- Aldermore launches online commercial broker portal
- Coventry drops interest-only LTV to 50pc
- LTV flash crash if stamp duty is hiked
- Precise joins SimplyBiz lender panel
- BUDGET 2012: Osborne's speech in full
- BUDGET 2012: Stamp duty crackdown severe
- BUDGET 2012: 50p tax cut to 45p
- BUDGET 2012: UK to avoid technical recession
- BUDGET 2012: Personal allowance raised to £9,205
- BUDGET 2012: Retrospective action threatened on tax
- BUDGET 2012: FTB Stamp Duty not addressed
- BUDGET 2012: Life insurers relieved at Budget
- BUDGET 2012: Retired hit by pension changes
Have Your Say