Recent press reports suggest the Government may lower the threshold at which the 50% income tax rate comes into effect, as it looks to boost the Treasury's coffers. Andrew Shaw, a partner at accountancy firm Kingston Smith, said: "Lowering the threshold at which the 50p tax rate comes into effect from £150,000 to £100,000 will undoubtedly hurt the nation's highest earners. But hardest hit will be those earning between £100,000 and £115,000, who will face an effective tax rate of 75% due to the withdrawal of personal allowances."
Last year the government increased the rate of capital gains tax (CGT) from 18% to 28% for higher-rate taxpayers. Entrepreneur's Relief also rose from £1m to £2m in March under the Labour government and, later, from £2 million to £5 million under the new coalition government. "It's unlikely that there will be further changes to the CGT rate in the March Budget," said Chris Lane, partner and head of entrepreneurial businesses at accountancy firm Kingston Smith. "Instead, we now need a bedding-down period that will give individuals a chance to get used to the recent changes."
In September the Government announced the introduction of a new regional National Insurance Contributions (NICs) holiday for new businesses set up outside London, the South East and East of England. Under the scheme, which will run for three years, eligible businesses qualify for a holiday worth up to £5,000 for up to the first ten employees they hire in their first year of business. This means a maximum saving of up to £50,000 on their NI payments. But analysts at Kingston Smith claim statistics show take-up of the scheme has been poor and predict the Government will either bury the scheme and make no mention of it in the Budget announcement or extend it to the whole of the UK, which is unlikely given the potential cost.
The Chancellor of the exchequer will give his Budget Speech on 23 March.
