With less than a week to go before the Autumn Statement, how will the Chancellor balance vote-winning tax breaks with much needed austerity measures?
Baker Tilly looks at what Mr Osborne might announce in the final Autumn Statement before the General Election…
In terms of personal tax, it is expected that a lifetime cap on the total amount that can be invested in ISAs may be introduced.
It is also expected that additional tax restrictions may be introduced on pension contributions, and this might have a knock-on effect on the cost of pensions contributions for those paying tax at the higher and additional rates of income tax.
However, in a move that is likely to be popular with middle England, the Chancellor may also announce an increase in the Inheritance Tax Nil Rate Band from £325,000 per person to £1m.
Home owners could see an announcement around a comprehensive review of the operation of Main Residence Relief (MRR).
There have been small changes to MRR in the past, but the time is right for a fundamental review of how gains on private residences should be taxed.
Depending on how extensive reform will be, all UK homeowners could be affected – especially those owning more than one home, and non-UK residents.
For businesses, it is likely that the Chancellor will maintain a pro-business environment with low corporation taxes and reliefs aimed at supporting economic growth.
However, there could be a change announced on the Annual Investment Allowance of £500,000 which would otherwise revert to £25,000 on 31 December 2015. It is possible that this could be extended for another year or even further.
Tax avoidance and evasion is likely to form part of the Chancellor’s speech, with possible moves to strengthen the disclosure of tax avoidance schemes, the introduction of a strict criminal liability power for offshore tax irregularities, and more powers to HMRC to enhance their civil powers for tackling offshore tax evasion.
The taxation of non-UK residents could also be announced, with the possibility of a restriction on non-UK residents’ ability to claim the UK personal allowance.
In a move that will be popular with the hospitality sector, there could also be an announcement that a reduced VAT rate could be applied to restaurant and catering, hotel accommodation and admissions to amusement parks, concerts and other cultural events.
Tim Parr, tax partner at Baker Tilly in Leeds, said, “With a general election looming, there could be some major initiatives announced in the autumn statement.
“I would be particularly pleased to see a reduced VAT rate for the hospitality industry. Restaurants, which create large numbers of employment opportunities, suffer huge tax costs – particularly when contrasted with VAT zero-rated food eaten at home.
“Similar initiatives around Europe have played a very positive role in job creation.”