Pre-Budget Report 2009 - KPMG's hopes and expectations on personal tax
Individual taxpayers, particularly those in the higher earnings brackets, will be eyeing next week's pre-budget report a little nervously, according to KPMG in the UK.
David Kilshaw, head of private client advisory at KPMG in the UK, said:
"In view of the difficult economic climate we hope that the Chancellor will announce a commitment to minimize changes to the tax system as well as to a limited finance bill in 2010. But with an election around the corner some 'voter-friendly', rabbit out the hat style tax measures are a distinct possibility.”
KPMG's view on specific measures are detailed in the predictions article here.
In summary, KPMG's hopes and expectations are:
Inheritance tax and wealth tax
- A 'wealth tax' has been rumoured but KPMG warns that such taxes can be very complex to administer and hopes that no such measure will be introduced in these difficult times.
- Some increase to inheritance tax is possible, according to KPMG - perhaps targeting higher value estates (50 percent rate on £1 million plus for example) and / or an increase in the time required for lifetime gifts to become exempt (increase the current 7 years to 14 perhaps).
- There is a chance that the valuable Business Property Relief exemption could be restricted - a move that would be very unpopular with family businesses
Rates of income tax
- Scrap complicated raft of changes to personal allowances on income over £100,000 and replace with a simpler system
- Introduce some mechanism to refund income tax and national insurance paid on bonuses which are later clawed back under proposed changes to bonus rules
Allowances and thresholds
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Next year's tax allowances are usually announced in the PBR and normally increase in line with the Retail Price Index. Even though RPI has declined, KPMG expects a modest increase to allowances and thresholds.
Capital Gains Tax
- KPMG hopes the Chancellor will resist temptation to raise rate of Capital Gains Tax from current 18 percent on the basis of the new top rate of income tax of 50 percent from April next year.
- Measures restricting ways to receive capital rather than income for tax purposes are likely
- Extension to Entrepreneurs' Relief would be welcomed
Pensions
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KPMG expects to see details of the very complex rules around how relief for pension contributions will be tapered from 40 percent to 20 percent for those earning between £150,000 and £180,000. Additionally, KPMG hopes to see some simplification of the current "anti-forestalling” provisions designed to prevent individuals making extra pension contributions before the new rules come in.
Benefits in kind
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There have already been rumours of changes to the tax rules on childcare vouchers. KPMG anticipates a further announcement on this.
David Kilshaw concluded: "There have been some real surprises on personal tax in previous budgets and pre-budget reports - scrapping of the 10p tax rate and the changes to the non-dom rules probably being the most significant. However, hastily developed tax measures often have serious unintended consequences and we very much hope that this time the Chancellor opts for an autumn statement light on tax changes .”
-ENDS-
For media enquiries please contact:
Margot Cowhig
Senior PR Manager, Tax and People Services
Tel: +44 207 694 4246 / +44 7920 274856
margot.cowhig@kpmg.co.uk
About KPMG:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff. The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.