Speculation Arises Over UK’s Tax Outlook

December 8, 2009 Taxation in UK

George Osborne 0482amAhead of the Pre-Budget Report (PBR), due to be delivered on December 9th by Alastair Darling, Chancellor to the Treasury, a slew of speculation has arisen regarding possible tax rates increases and installation of new tax types in the UK. Though the PBR deals with government spending and economic forecasts, this year is likely to see an increased focus on the issue of taxation as the UK government copes to deal with financial crisis induced budget deficits.

Common media discussion centers around the announcement of a possible one-year only tax on banker’s bonuses, at the PBR. Only payouts exceeding a pre-set threshold are anticipated to be subject to the additional tax measure, which is expected to earn in excess of £1 billion for the year. The proposed tax would be charged on both UK banks and UK based branches of foreign owned banks.

George Osborne, the shadow chancellor, has already given his general support to the idea of a tax on banker’s bonuses. Alastair Darling, in a recent television appearance stated “It wouldn’t be right to be giving further tax breaks to people at the very top. We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what’s going on”.

An increase in UK’s Value Added Tax (VAT) is considered by numerous media sources to be a likely addition to the PBR announcement. The tax receipt rise from such a move is estimated to be £5 billion per annum, at a weekly cost of £1 to the average UK wage earner. Increases to Capital Gains Tax and Inheritance Tax are also expected. Additionally, changes to income taxation, such as an extra high-earner tax band or a lowering of the current top-earner threshold, are suspected to be implemented.

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