Is the very latest UK budget a stealth tax budget?
What is very interesting of course is not what is in this rather meaningless budget but that which is not and that is why it is yet another stealth tax budget.
For example there are no inflation linked increases to personal allowances or band rates and whilst wages are rising this means that the tax mans slice of the cake wise has increased.
The public expect inflation linked increases as they simply suffer inflation in the cost of living and they get pay rises inline with inflation.
I have no doubt that the freeze on personal allowances and tax bands with out any increases for underlying inflation is a classic stealth tax.
Looking at some actual tax figures for 1997/98 they reveal that £67,041 million was collected under PAYE and for the year 2008/9 this had grown to £128,752 million which is a massive rise of over 90%. The average wage increase during this period amounted to 5% per annum whilst the tax increase was 8% per annum so irrespective of this budget the tax take has increased on average by 3% per annum which over 13 years amounts to a whooping 39%. In the latest budget personal allowances are being held at £6,475 which means that every tax payer in the UK will pay approximately an additional £50.00. The level from which higher rate tax becomes payable remains at £43,875 which is the basic rate band of £37,400 plus the personal allowance of £6,475 will mean that those tax payers will pay an extra £489 and an additional 75,000 people will become liable for the higher rate tax for the first time.
It has been calculated that this stealth tax raised by not adjusting these two tax bands in line with inflation will raise more than £1.4billion.
Another tax which has had no inflation linked increase is the level at which Inheritance tax is payable and will remain at some £325,000. This will raise an extra £60 million in revenue and the limit is going to be frozen for the next four years. This will undoubtedly bring thousands of extra families into the band of death duties due to the fact that inflation is currently running at 3%.
All of these tax hikes come on top of the increased rate to 50% for those earning more than £150,000 per annum.
Targeting those that earn more than £150,000 will raise an additional £1.2 billion in taxes.
Some very good news is that the discussions that were taking place just prior to the budget as to whether the Chancellor could afford to defer the planned 3p rise in fuel duty were partly successful.
Pump prices are rapidly increasing upwards to 120p a litre or more than £5 a gallon for those of us who can remember an imperial gallon.
The Chancellor was able to announce that the Fuel duty will rise 1p in April with a like rise in October and in January 2011.
Duty on Cider will increase by 10% above inflation and duty on wine ,beer and spirits also increase but by 2% above inflation. These increases take effect from midnight Sunday 28th March 2010.
Some good news for first time house buyers in that there is no stamp duty on purchases up to £250,000. The funding for this is obtained by increasing stamp duty for purchases above £1m which will be at 5%.
A very good move for first time buyers which the Chancellor believes will exempt 90% of first time purchasers from this tax.
ISA (individual savings accounts)limits will increase in line with inflation in future which is somewhat contradictory as one allowance is inflation linked but others are not.
In summary clearly this is very much a stealth tax budget.
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