The Dream Budget
Discussion
Read this with interest so thought I'd share it with others. What do you make of it?
Linky here: http://uk.biz.yahoo.com/20042009/389/dream-budget....
Article:
We've had the injury, now prepare for the insult. Every one of us is now deep in hock thanks to bank bailouts but my advice is to expect absolutely nothing from this month's Budget. Unless perhaps you drive an electric car.
There is likely to be a small increase to ISA limits but not enough to be of real help to savers. Pension credit could get a boost too, but still not enough to help millions of elderly people on a fixed income. But you can also expect announcements that tax will rise from next year or the year after plus noises about a National Insurance increase from 2011 and perhaps some confirmation of what will happen to VAT once it returns to 17.5% at the end of this year (rumours abound of a rise to 19% next year).
No prizes for anticipating a grim economic forecast. The contraction could be as much as 3% of GDP while borrowing booms.
Against this stark background, I thought some unbridled optimism would be in order in the form of a Dream Budget. Here's what Alistair Darling would do if he really cared.....
1. Help savers... by abolishing the 20% tax on the interest in savings. A special increase to pensioners' tax allowances would also be a help, making more of their income tax-free. The Conservatives have described savers as 'the innocent victims of the recession'. They have backed calls to scrap the tax on savings and have said they want to raise the tax-free allowances - the level of income on which no tax is paid - by £2,000 for everyone over 65. Accountants Deloitte says that while average interest rates are low, that would not cost government a lot - about £600m with average rates below 1%. On a lighter note, Scott White at investment experts Martin Currie would like to see 10% cashback applied to pocket money. "my two eldest children are far more assiduous accumulators of wealth than I have ever been," he says.
2. Increase ISA limits.... "This may be controversial as they are trying to get us to spend, but the ISA limits have not increased since they were instigated over ten years ago," says Helen Webster, Aegon Asset Management UK's head of product development. "In real terms they have actually decreased in value for savers," she says. According to Unbiased.co.uk's Taxaction report, the UK as a whole is currently wasting in excess of £140 million by not being tax efficient when it comes to savings. "An increase in ISA limits may go some way to encourage more people to make use of their tax-free savings allowance and reduce the overall amount of tax wasted, as well as giving a boost to savers in this low interest rate environment," says Unbiased chief executive David Elms.
3. Make ISAs more simple and flexible... "In order to encourage people to save tax efficiently, the message is clear, ISAs must be simple and flexible; simpler ISA limits, the ability to be able to dip in and top up and for two way transfers between Cash and Stocks & Shares ISAs, will all help," says Reza Attar-Zadeh of Alliance & Leicester. "Our research found a number of areas where savers would like to see improvements and we would urge the government to consider savers' needs in the upcoming Budget.”
4. Reinstate the dividend tax credit.... From April 2004, investors lost the ability to reclaim a tax credit on dividends from shares held within an ISA.The saving to the government from this measure was estimated to have been around £200 million a year – a drop in the ocean in the context of recent events – but the negative impact on Britain's savings culture has been much greater than this. Fidelity estimates that the re-introduction of the dividend tax credit could increase the returns of existing savers by up to 13% over ten years and would also encourage new saving.
5. Freeze/Scrap Stamp Duty... The last budget raised the point at which a house buyer starts paying stamp duty temporarily from £125,000 to £175,000. This could be extended but surely the property market stands a better chance of recovery if Stamp Duty is scrapped completely. Revenue from Stamp Duty has collapsed in light of the approximate 60% drop in property transactions and 25% drop in prices. The latter causes revenue to fall by well over 25% because it takes some properties out of the net completely and moves many from the 3% tax band down to the 1% band and others from the 4% band to the 3% rate.
As a result John Charcol (which would like an indefinite suspension) estimates that the current run rate of revenue from stamp duty land tax is now well below £2billion a year. and so forgoing this would only cost about one sixth of the cost of the one year VAT cut, which is generally recognised as having been ineffective in stimulating sales.
Ray Boulger, senior technical manager at John Charcol comments: "There are two reasons behind the suggestion that this suspension should be for an unspecified period: firstly, prospective purchasers could not risk delaying too long on the basis that they had, say, a year, in which to buy without paying stamp duty and secondly, the Chancellor of the day would have discretion as to when to reinstate the tax and could therefore fine-tune this with an up-to-date view of the state of the market. This would also provide an ideal opportunity to make the tax fairer when it was re-introduced by avoiding the sudden jump in its cost at the threshold levels.
6. Scrap Home Information Packs.... "Although potentially useful, they seem to be causing more problems than they are solving," says Michelle Slade of Moneyfacts.co.uk.
7. Cut fuel tax... It may have only just come into force but the additional 2.12pence per litre of petrol should be dropped. The AA, which opposed the rise, said for a family with two cars, each using an average of 1,286 litres per year, the annual tax increase will be £54.53. The Freight Transport Association said the rise could "push businesses over the edge".
AA president Edmund King said: "These April fuel increases are no joke. It's a shame that this and other fuel tax increases will severely dent consumer spending and undermine the UK's economic recovery. Taking an extra £1 off drivers each time they fill up their fuel tank is a £1 taken away from High Street and leisure spending that would help revive the economy."
8. Raise the Inheritance Tax threshold.... to over £1million so that family homes are protected.
9. Simplify annuity rules... to avoid confusion and help buyers get the best deals and raise the age for compulsory purchase to at least 80, in line with the later age at which a pension can be taken.
10. Take action on pensions.... This could be a whole list on its own but for starters he could ditch pension credit and replace it with a meaningful basic State Pension.
11. Help older people..... Workers aged 50+ have been disproportionately impacted by the recent job cuts according to Age Concern and Help the Aged, the newly merged charity for older people. It is calling for the 2009 Budget to address unemployment and fuel poverty, secure Post Office branches and provide emergency funding of at least £1 billion to tackle the immediate crisis in the social care system.
12. Ban credit card cheques.... designed purely to make pots of money for credit companies.
13. A VAT exemption on financial planning advice fees.... Michael Greenwood, Head of Technical Liaison at Towry Law says: "Financial planning fees, where the adviser has no incentive other than doing what is best for the client, are subject to VAT, unlike commission-based advice. This differential should be equalised either by removing VAT on financial planning fees or including it on commission for the sale of financial products."
14. Review council tax... Something which costs everyone a small fortune and has just enjoyed its 12th successive above-inflation increase, taking the average household band D bill up £40 to £1,414. The average payment was £564 when Gordon Brown took over as Chancellor in 1997. Have your local services become twice as good in that time?
OK, so strictly speaking this down to the councils and the Department of Communities and Local Government, but this is a fantasy Budget and I am sure Darling could pull rank.
Linky here: http://uk.biz.yahoo.com/20042009/389/dream-budget....
Article:
We've had the injury, now prepare for the insult. Every one of us is now deep in hock thanks to bank bailouts but my advice is to expect absolutely nothing from this month's Budget. Unless perhaps you drive an electric car.
There is likely to be a small increase to ISA limits but not enough to be of real help to savers. Pension credit could get a boost too, but still not enough to help millions of elderly people on a fixed income. But you can also expect announcements that tax will rise from next year or the year after plus noises about a National Insurance increase from 2011 and perhaps some confirmation of what will happen to VAT once it returns to 17.5% at the end of this year (rumours abound of a rise to 19% next year).
No prizes for anticipating a grim economic forecast. The contraction could be as much as 3% of GDP while borrowing booms.
Against this stark background, I thought some unbridled optimism would be in order in the form of a Dream Budget. Here's what Alistair Darling would do if he really cared.....
1. Help savers... by abolishing the 20% tax on the interest in savings. A special increase to pensioners' tax allowances would also be a help, making more of their income tax-free. The Conservatives have described savers as 'the innocent victims of the recession'. They have backed calls to scrap the tax on savings and have said they want to raise the tax-free allowances - the level of income on which no tax is paid - by £2,000 for everyone over 65. Accountants Deloitte says that while average interest rates are low, that would not cost government a lot - about £600m with average rates below 1%. On a lighter note, Scott White at investment experts Martin Currie would like to see 10% cashback applied to pocket money. "my two eldest children are far more assiduous accumulators of wealth than I have ever been," he says.
2. Increase ISA limits.... "This may be controversial as they are trying to get us to spend, but the ISA limits have not increased since they were instigated over ten years ago," says Helen Webster, Aegon Asset Management UK's head of product development. "In real terms they have actually decreased in value for savers," she says. According to Unbiased.co.uk's Taxaction report, the UK as a whole is currently wasting in excess of £140 million by not being tax efficient when it comes to savings. "An increase in ISA limits may go some way to encourage more people to make use of their tax-free savings allowance and reduce the overall amount of tax wasted, as well as giving a boost to savers in this low interest rate environment," says Unbiased chief executive David Elms.
3. Make ISAs more simple and flexible... "In order to encourage people to save tax efficiently, the message is clear, ISAs must be simple and flexible; simpler ISA limits, the ability to be able to dip in and top up and for two way transfers between Cash and Stocks & Shares ISAs, will all help," says Reza Attar-Zadeh of Alliance & Leicester. "Our research found a number of areas where savers would like to see improvements and we would urge the government to consider savers' needs in the upcoming Budget.”
4. Reinstate the dividend tax credit.... From April 2004, investors lost the ability to reclaim a tax credit on dividends from shares held within an ISA.The saving to the government from this measure was estimated to have been around £200 million a year – a drop in the ocean in the context of recent events – but the negative impact on Britain's savings culture has been much greater than this. Fidelity estimates that the re-introduction of the dividend tax credit could increase the returns of existing savers by up to 13% over ten years and would also encourage new saving.
5. Freeze/Scrap Stamp Duty... The last budget raised the point at which a house buyer starts paying stamp duty temporarily from £125,000 to £175,000. This could be extended but surely the property market stands a better chance of recovery if Stamp Duty is scrapped completely. Revenue from Stamp Duty has collapsed in light of the approximate 60% drop in property transactions and 25% drop in prices. The latter causes revenue to fall by well over 25% because it takes some properties out of the net completely and moves many from the 3% tax band down to the 1% band and others from the 4% band to the 3% rate.
As a result John Charcol (which would like an indefinite suspension) estimates that the current run rate of revenue from stamp duty land tax is now well below £2billion a year. and so forgoing this would only cost about one sixth of the cost of the one year VAT cut, which is generally recognised as having been ineffective in stimulating sales.
Ray Boulger, senior technical manager at John Charcol comments: "There are two reasons behind the suggestion that this suspension should be for an unspecified period: firstly, prospective purchasers could not risk delaying too long on the basis that they had, say, a year, in which to buy without paying stamp duty and secondly, the Chancellor of the day would have discretion as to when to reinstate the tax and could therefore fine-tune this with an up-to-date view of the state of the market. This would also provide an ideal opportunity to make the tax fairer when it was re-introduced by avoiding the sudden jump in its cost at the threshold levels.
6. Scrap Home Information Packs.... "Although potentially useful, they seem to be causing more problems than they are solving," says Michelle Slade of Moneyfacts.co.uk.
7. Cut fuel tax... It may have only just come into force but the additional 2.12pence per litre of petrol should be dropped. The AA, which opposed the rise, said for a family with two cars, each using an average of 1,286 litres per year, the annual tax increase will be £54.53. The Freight Transport Association said the rise could "push businesses over the edge".
AA president Edmund King said: "These April fuel increases are no joke. It's a shame that this and other fuel tax increases will severely dent consumer spending and undermine the UK's economic recovery. Taking an extra £1 off drivers each time they fill up their fuel tank is a £1 taken away from High Street and leisure spending that would help revive the economy."
8. Raise the Inheritance Tax threshold.... to over £1million so that family homes are protected.
9. Simplify annuity rules... to avoid confusion and help buyers get the best deals and raise the age for compulsory purchase to at least 80, in line with the later age at which a pension can be taken.
10. Take action on pensions.... This could be a whole list on its own but for starters he could ditch pension credit and replace it with a meaningful basic State Pension.
11. Help older people..... Workers aged 50+ have been disproportionately impacted by the recent job cuts according to Age Concern and Help the Aged, the newly merged charity for older people. It is calling for the 2009 Budget to address unemployment and fuel poverty, secure Post Office branches and provide emergency funding of at least £1 billion to tackle the immediate crisis in the social care system.
12. Ban credit card cheques.... designed purely to make pots of money for credit companies.
13. A VAT exemption on financial planning advice fees.... Michael Greenwood, Head of Technical Liaison at Towry Law says: "Financial planning fees, where the adviser has no incentive other than doing what is best for the client, are subject to VAT, unlike commission-based advice. This differential should be equalised either by removing VAT on financial planning fees or including it on commission for the sale of financial products."
14. Review council tax... Something which costs everyone a small fortune and has just enjoyed its 12th successive above-inflation increase, taking the average household band D bill up £40 to £1,414. The average payment was £564 when Gordon Brown took over as Chancellor in 1997. Have your local services become twice as good in that time?
OK, so strictly speaking this down to the councils and the Department of Communities and Local Government, but this is a fantasy Budget and I am sure Darling could pull rank.
Edited by Republik on Wednesday 22 April 09:50
plasticpig said:
Thats all about cutting revenue. The government need to increase revenue to pay off the massive debt they have generated. I see no suggestions about how they should do this.
... and I think that's the point. The Government has taken more and more from the taxpayer since it came to power, and there is precious little to show for it. Now it has run it's credit limit to the maximum (and beyond), it will need to take yet more to pay it off. Money which the general population simply doesn't want to give. It really seems as if the government's aims and priorities are directly contrary to those of the population.
On a related note, it always slightly confuses me when any tax change is presented as being 'only' £x-million. If it is a low amount then it will not have much bearing on the population (as it is not making much difference), but by the same token will only produce (or cost) the government very little. I've never quite understood the reasons for saying such things.
Oli.
zcacogp said:
plasticpig said:
Thats all about cutting revenue. The government need to increase revenue to pay off the massive debt they have generated. I see no suggestions about how they should do this.
[/quot]
Money which the general population simply doesn't want to give.
More like money the general population simply doesn't have!![/quot]
Money which the general population simply doesn't want to give.
zcacogp said:
plasticpig said:
Thats all about cutting revenue. The government need to increase revenue to pay off the massive debt they have generated. I see no suggestions about how they should do this.
... and I think that's the point. The Government has taken more and more from the taxpayer since it came to power, and there is precious little to show for it. Now it has run it's credit limit to the maximum (and beyond), it will need to take yet more to pay it off. Money which the general population simply doesn't want to give. It really seems as if the government's aims and priorities are directly contrary to those of the population.
On a related note, it always slightly confuses me when any tax change is presented as being 'only' £x-million. If it is a low amount then it will not have much bearing on the population (as it is not making much difference), but by the same token will only produce (or cost) the government very little. I've never quite understood the reasons for saying such things.
Oli.
1. Legalise all drugs and tax them accordingly. This would genrate revenue additional revenue and also save money: http://www.guardian.co.uk/society/2009/apr/07/drug...
2. Legalise brothels and tax them accordingly.
3. Close tax loopholes that allow individuals and companies to doge UK taxation: http://www.timesonline.co.uk/tol/news/uk/article59... and http://www.guardian.co.uk/business/2009/mar/17/bar...
Mattygooner said:
Abolish empty rates on Commercial Property. It is killing the Property market and is such a stupid tax to have in the current climate.
I was reading a piece yesterday the landlords are pulling down som eproperties rather than leave them empty?What time does the slug browed t
t stand up and recite Gordy's latest budget?I would have thought that cutting back on the monumental bureaucracy they have created would help funding wise, but would create a great deal more unemployment, so round we go. The creation of a massive, unproductive public sector over the last few years, whilst the productive, private sector is contracting and streamlining is never going to work out well.
Aowhs102 said:
I would have thought that cutting back on the monumental bureaucracy they have created would help funding wise, but would create a great deal more unemployment, so round we go. The creation of a massive, unproductive public sector over the last few years, whilst the productive, private sector is contracting and streamlining is never going to work out well.
CHeaper to pay them dole money than 40k a year coordinating diversity with a final salary pension....plasticpig said:
1. Legalise all drugs and tax them accordingly. This would genrate revenue additional revenue and also save money: http://www.guardian.co.uk/society/2009/apr/07/drug...
As much as I like the idea, the revenue generated would be less than the NHS cost to deal with the resultant problems.Cannabis would be a good start though.
dirty boy said:
plasticpig said:
1. Legalise all drugs and tax them accordingly. This would genrate revenue additional revenue and also save money: http://www.guardian.co.uk/society/2009/apr/07/drug...
As much as I like the idea, the revenue generated would be less than the NHS cost to deal with the resultant problems.Cannabis would be a good start though.
dirty boy said:
plasticpig said:
1. Legalise all drugs and tax them accordingly. This would genrate revenue additional revenue and also save money: http://www.guardian.co.uk/society/2009/apr/07/drug...
As much as I like the idea, the revenue generated would be less than the NHS cost to deal with the resultant problems.Anyway, as to the budget, let me guess:
1) More tax on petrol and booze. Well gosh, how imaginative is that?
2) More tax on everything else
3) A few quid spent on 'child poverty' (WTF?) and other lost causes so he's got something to crow about.
Basically, we're all screwed.
I wonder if he'll use the word 'Prudent' this time?
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