There is wide speculation as to what is in store for the coalition government’s first budget.

The forth coming emergency budget was planned by the Conservative Party, on the basis that they were to win the general election and it seems that there will have to be a mixture of tax increases and public spending cuts.

Whilst those in most government departments are aware that he axe will have to fall, for many in the private sector the range of tax increase are still unclear.

Most likely areas for tax increases will be:

VAT – a fairly straight forward way of increasing the overall tax take. The political implication is that the Lib Dem’s campaigned against any rise and VAT is normally seen as hitting lower income families hardest.

Capital Gains Tax (CGT): The current flat 18% rate for capital gains tax has seen a raft of planning in the sphere of shifting income to capital (where possible). The Liberal Democrats campaigned on the basis of an increase in CGT to bring it in line with income tax rates.

There are a number of complexities with shifting rates – inflation needs to be taken into account, those who are realising gains from strategic long term planning compared with those who are exploiting short term gain. Thought must be given ….

A number of clients are questioning what should be don’t to shelter any gains at the current rate, this is the subject of a separate blog entry.