It was smiles all round at the recent press conference held by Conservative PM David Cameron and Lib Dem Deputy PM Nick Clegg, but will the cheer extend to the businesses and individuals who put them in power?
The short answer is that we cannot yet say for sure. At the time of writing (13/5) the new ministers were still visiting the Queen for seals of office, and have not yet tabled any legislation. We can sensibly expect an emergency Budget in the next few weeks, though, and the country’s huge debts mean the measures will be almost certain to raise tax and cut spending. Nonetheless, the leaks from the Treasury and sources close to it suggest the following are all on the cards:
- A hike in Capital Gains Tax to rates close to Income Tax for assets held outside of a business. This means that owners of buy-to-let property, (and in some cases second home owners) who hold it outside of tax protection like a pension or an ISA, face a much larger tax bill if they try to sell the property after the change is effected. This usually happens on the 5th or 6th of April each year, but it could be introduced retrospectively.
- VAT may rise from 17.5% to 20%, increasing costs for any small business or individual who cannot reclaim input tax.
- A Great Repeal Act. The new government proposes to repeal some of the more pointless red tape that has emerged over the last decade. How much and which regulations will fall away is not yet clear, and so it is impossible to predict effects in each case.
- The proposed rise in employee National Insurance contributions will not happen. Businesses employing staff can hire and retain them without the increased marginal costs of higher NI.
- Spending cuts will be likely targeted away from front-line services such as teaching, clinical and armed forces staff. This is bad news for those in or reliant on less crucial (or less visible) public sector employment.
- The measures could well strengthen sterling, making importing cheaper and exporting more expensive.
These are a guideline only and are no substitute for formal advice. Slee Blackwell has specialist lawyers able to assist on matters affecting both private individuals and companies.