What’s coming up in the Budget?

With the country now awaiting the coalition government’s next move, the forthcoming emergency budget is poised to bring in a number of key changes to public and personal finances - how is this going to affect us?

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Felicity King-Evans: As David Cameron warns of tough times and hefty cuts, the country’s braced for an emergency Budget on June 22nd. But what might be in it?

Well the whirl of the election is now over, and our Coalition government are finally starting to put into practise some of the promises they made on the campaign trail.

Of course, that’s made even more difficult because the Liberal Democrats and the Conservatives had different pledges that they’re now having to hammer into one firm set of policies. And that’s against a backdrop of national debt that could see interest payments alone rise to £70 billion a year within five years.

So what might be on the cards on the 22nd? Well, here’s a rundown.

Tax

Most of us want to know what’s likely to happen to the pound in our pocket – what will happen to taxes?

Well, remember the Liberal Democrats plans to raise the personal income tax allowance from £6,475 up to £10,000 a year – that would have lifted around 3.6 million people out of having to pay any income tax at all.

That’s unfortunately unlikely to be affordable at the moment but we could see some sort of change in the threshold.

CGT

Rumours have been flying about what that the coalition government is going to do about capital gains tax, with some people predicting it could rise to 40% or even 50% to bring it more in line with income tax. Investors in everything from property to properties like this one to shares have reacted furiously to rumours of a hike, but it does seem likely that one’s on the cards. At the moment, CGT is paid at 18% - That’s after an allowance of £10,000.

VAT

Many people are economists are predicting that VAT is going to have to rise to plug that hole in the nation’s finances. The Coalition hasn’t specifically addressed VAT but many economists are saying it’s probably going to rise from 17.5% to 20%.

Tax Credits

During the election campaign both the Conservatives and the Liberal Democrats said they wanted to reform the tax credit system. The Tories wanted to stop paying tax credits to families earning more than £50,000 a year, while the Lib Dems suggested that a one-child family shouldn’t be entitled to the credits if they earn more than £25,000, but that threshold would increase by £6k for each additional youngster. So it could well be that we see some sort of change in the child tax credit rules.

Of course, a number of key policies have already been implemented. Home information packs or HIPs have been scrapped; Child Trust Funds are being slowly phased out and the Coalition has agreed to keep the stamp duty reform, meaning people will pay 5% stamp duty when they sell properties worth £1million or more.

As for other key pledges, we’ll have to wait until the 22nd of June to see if the Coalition has any plans to keep manifesto promises such as freezing Council Tax, raising the tax for nom-doms and or imposing the Liberal Democrats mansion tax – that’s 1% a year on properties worth £2million or more.

Special thanks to Crown Copy for image of David Cameron.

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