Credit crunch forces tax cuts to top of UK political agenda.jpg

Credit crunch forces tax cuts to top of UK political agenda


[email protected]

Bill Blevins is Managing Director of Blevins Franks. He has specialised in expatriate investment and tax planning for over 35 years. He has written books and gives lectures on this subject in Southern Europe and the UK.

IN THE UK, the TaxPayers’ Alliance (TPA) has published stark new polling and research evidence that, with the credit crunch tightening its grip, British taxpayers are facing a cripplingly high tax burden, and floating voters are willing to give their vote to the party that promises tax cuts.

New polling for the TPA shows that, in the last 12 months, public opposition to high taxes has grown greatly, a massive cross-party majority has built up against green taxes, and crucial floating voters are up for grabs to the party willing to stamp out waste, reduce spending and cut taxes.

According to the Lifetime Tax report, the average total lifetime tax on British families of up to £668,000 is a huge jump from the £631,000 lifetime tax bill which the TPA reported last year – a rise of almost six per cent It goes on to add that poor families were even harder hit by rising taxes, seeing their tax bill jump 13 per cent  in one year to £264,000, up from £233,000 last year. According to the TPA, this shows that any party serious about tackling poverty must address the issue of tax cuts.

The poll also concludes that only five per cent think the government taxes too little and spends too little. The view that taxation and spending are too high is now the most popular view in every party and, significantly, an overwhelming 73 per cent of floating voters agree with the proposition, and goes on to state that overall, 36 per cent of people would be more likely to vote for a party that committed not to raise taxes, compared to only six per cent who would be less likely to give that party their vote.

Frosty reception for Tory Council Tax Freeze

UK Shadow Chancellor George Osborne is facing an increasing backlash from central and local government representatives over his announcement that he would abolish increases in council tax for the two years subsequent to the election of a Conservative government.

Under the basic guidelines of the proposal, any council that makes savings to keep its annual council tax increase to 2.5 per cent or below will receive additional money from central government to reduce council tax bills by a further 2.5 per cent.  This central government funding will be raised by reducing spending on expensive private sector consultants and advertising by £500 million in the first full year of government, and by £1 billion in all subsequent years.

However, according to opinion polls, local council leaders have unsurprisingly shown little enthusiasm for the idea, and have branded it as little more than an elaborate election campaign which could end up having damaging consequences for several of the UK’s other services.

Councils are now worried that Osborne has failed to recognise the potential impact the tax suspension could have upon public funding, predicting that they will have to re-introduce council tax at much higher rates in the years following the freeze and cut the amount of funding available for other sectors, such as schools and housing, in order to compensate for losses.

IHT nil-rate band could treble under Tories

The inheritance tax (IHT) threshold in the UK could be raised to £1 million per person and £2 million per married couple if the Conservative Party wins the next general election. This would be a threefold increase on the current threshold for 2008/09 of £312,000 per individual/£624,000 per married couple and would remove the burden of this unpopular tax from the majority of British families.

The UK IHT rate is 40 per cent on any amount over the tax-free threshold. If the Tory plan comes to fruition, beneficiaries will be able to inherit a total of £2 million from a married couple without having to pay any IHT.  Each spouse would have a £1 million tax-free allowance which on the first death would transfer free of tax to the surviving spouse. This would mean that a surviving parent could then pass £2 million worth of assets to their children tax-free or indeed, to anyone they wish to inherit.

The £2 million threshold is double that announced by the Tories at last year’s Conservative Party conference when the Shadow Chancellor, George Osborne, pledged to increase the level to £1 million thereby freeing around nine million families from the punitive tax. It was after this announcement that the Labour Chancellor, Alistair Darling, increased the IHT threshold for couples and civil partners from the then £300,000 to £600,000.

Head of taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury, said: “This is excellent news for many people who increasingly regard IHT as an unfair tax because it is a form of double taxation or tax on assets that have usually been acquired out of taxed income.

Tax guide doubles in size

Tolley’s Yellow Tax Handbook for 2008 has now doubled in size since 1997, when Labour came to power. The current edition is made of up four volumes totalling 10,134 pages. In 1997 it was two volumes of nearly 5,000 pages.

Information provider and publisher LexisNexis changed the page layout and increased the number of words on each page to prevent the edition going to five volumes. Commenting on how the size of the new guide demonstrated the complexity of Britain’s tax regime, LexisNexis tax expert, Mike Truman, said:  “The UK tax system continues to be a burden to businesses and individuals trying to obey a tax code which rivals India’s as the longest in the world.”

To keep in touch with the latest developments in the offshore world, check out the latest news on our website