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The wealthy, the squeezed middle or the living waged – who stands to win in this year’s Budget?

Britain’s individuals are slowly dividing into three financial categories, each with their own wish list at budget time. There are “the wealthy”, the top 1% who pay around 30% of the taxes, the “squeezed middle”, who have had increased taxes and reduced benefits, and those who are being removed from the tax system but are still in need of a “living wage”.

It is difficult to appease all of these groups at the same time, so will the forthcoming budget benefit any of them?

For the wealthy, we are unlikely to see any tax giveaways. The top rate of tax was reduced to 45% last year and is not likely to go any lower this side of the 2015 election. There probably won’t be any tax increases either, but certain groups may be adversely affected – perhaps a reduction in the £10m of capital gains tax entrepreneurs’ relief; currently owners selling qualifying private businesses are taxed at a 10% rate of capital gains tax, rather than the usual 28%. Other changes could include a cap on the amount which can be saved tax-free in an ISA and limits on the amounts held between a number of trusts before inheritance tax charges apply.

The squeezed middle could benefit from adjustments to the starting point of the 40% rate of tax, which has lowered in recent years as the personal allowance has increased. Sadly Child Benefit will remain withdrawn for those with high income, despite the complexity of the system and number of individuals brought into the self-assessment tax return system.

We could see a promise to remove even more individuals from the tax system with a further increase to the personal allowance, which already sees an increase to £10,000 from April; perhaps a promise of a further increase in April 2015?

Other groups of individuals which fit into, or between, some of these categories include professionals who are being hit by significant changes in partnership business structures and pensioners who are most likely to be spared any extra squeeze on either income or tax.

Overall, despite a few “tweaks” to the system, it is unlikely that the Government will make any dramatic changes. Any beneficial change for one group will need to mean an adverse change to another and with just over a year to the next election, it is probably best not to turn any voters away, even if they can’t all be pleased.

This was posted in Bdaily's Members' News section by Baker Tilly .