PA Panel: Advisers expect Budget CGT and income tax raid

Capital gains (CGT) and income will be the biggest tax targets in next week’s Budget, advisers say.

More than 80% of the Professional Adviser Panel think Chancellor Alistair Darling will hike CGT from its current 18% level when he unveils his Budget on 24 March.

Commentators have predicted CGT could return to the rate of income tax, and several Panel members agree this is a likely outcome of next week’s Budget statement.

Almost two thirds think income tax could be increased, while 45% are concerned pension tax relief could come under fire once again.

Pensions experts, including the National Association of Pension Funds (NAPF) are hopeful the Chancellor will reduce the annual allowance from its current level of £245,000, instead of curbing pension tax relief.

Taxes on goods are also expected to rise, with many predicting the Government will increase VAT from 17.5%, along with the usual rises in fuel, tobacco and alcohol duty. Many see 20% as the most likely level for VAT, which has already risen from a temporary level of 15% to 17.5% in January this year.

More than a quarter believe inheritance tax (IHT) could be hit. Some Panel members say IHT thresholds will be frozen to raise money in future tax years.

Philip Stevenson, chartered financial planner at Ark Financial Planning, says: “Whoever comes to power will try to raise taxes by less explicit means, so VAT, CGT and pension tax relief will all come into play.”

Almost half of Panel members do not expect Labour to make any bold changes in next week’s Budget, while 31% believe they will make poor decisions to win votes.

The majority of IFA clients do not worry about Budget day, with 68% of Panel members saying their clients are not concerned.

One adviser says: “Why worry? There is nothing they can do about it until the ballot boxes are open.”

The Budget will be the last before a General Election, widely expected on 6 May, and the economy and budget deficit are shaping up to be crucial election issues.

Do you expect this year's Budget to make major reforms?

Where do you expect to see tax raises to plug the deficit? (Select as many as appropriate)

Do your clients worry about Budget day?