Coalition makes for tax uncertainty

Roll on Sunday, this year’s Tax Freedom Day. For those of you not in the know, this is the date, based on current tax rates, that UK tax payers stop working for the Chancellor and paying off their taxes and start working for themselves. That means that for 149 days of the year - from 1 January to 29 May - every penny earned by UK residents was taken to pay for government spending.

It’s a rather depressing thought for most of us, regardless of your attitude to tax. But in many respects, and particularly given the state of public finances, it’s a wonder that the date doesn’t fall far later in the year. (The date had indeed crept forward again this year, mostly on the back of the VAT rise in January.)

But given that we have a new coalition government in place, and with the emergency Budget now just four weeks away, professional advisers are already warning that almost inevitable tax rises will see next year’s TFD pushed back to mid June.

Tax is high on the agenda as the corporate world and private tax payers alike await with not insignificant anticipation the details of George Osborne’s inaugural Budget. The Government has already promised big tax changes in the months ahead, but just what form those changes will take is still a guessing game.

The Lib-Cons’ programme for government hasn’t done an awful lot to build on what was outlined in the initial agreement either. What the formation of a coalition government has done, however, is muddied the waters on tax. Uncertainty reigns.

Tax may have merited a section to itself in the coalition agreement, but it’s a section distinctly lacking in detail. So whereas the parties have agreed to “seek a detailed agreement” on non-business capital gains rates, there is no guarantee that the parties will be able to reach an agreement. The coalition deal says that capital gains rates will be "similar or close to those applied to income" but there is no precise figure or timetable given.

Similarly, a "substantial" rise in the personal allowance is promised for the emergency budget, but there is no detail on what a "substantial" rise is, nor who will benefit. And what of tax allowances for married couples, a key tax pledge of the Conservatives, which are briefly mentioned but with no detail on when they might be introduced.

No amount of second guessing will help those companies and individuals keen to proceed with tax planning to take advantage of tax breaks and tax incentives. I’m afraid you’re just going to have to wait and see what Osborne has to say on the big day.