Speculation is rife that George Osborne is under pressure to pre-empt possible interest rate increases next year by offering tax cuts in the forthcoming Budget announcements on 19 March.
Polling day for the 2015 general election is 7 May so an announcement to increase the basic personal allowance (presently £10,000) may be an option as this would feed into taxpayers’ pockets before polling day.
MPs are keenly aware that any increase in mortgage interest rates, prior to the next election, would have unfortunate associations with the coalition, even though the Bank of England is responsible for setting rates.
Many of the other tax changes for the 2014-15 year are disclosed in draft legislation released by HMRC last month. These include:
Personal Tax:
- Individuals born after 5 April 1948 will be entitled to a personal tax allowance of £10,000.
- Employees will be able to increase the maximum value of shares acquired under Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes. The increased limits will be: SIPs – £3,600 on the free shares that can be awarded to employees and £1,800 on the partnership shares employees can purchase; SAYE – the monthly amount that employees can save will be increased to £500.
- It is proposed that the annual exemption limit for employer-related loans, to be treated as earnings, will be increased from £5,000 to £10,000.
Capital Gains Tax:
- The annual exempt amount is to be increased to £11,000.
- The rule that exempts the final 36 months of ownership of a private residence from CGT is to be reduced to 18 months. The 36 months will still apply if the owner is disabled or moved into a care home.
Business Tax:
- HMRC are introducing new legislation affecting Limited Liability Partnerships. Members of LLPs who satisfy the new criteria as “salaried members” will effectively lose their self employed status and be taxed under the PAYE legislation. There will also be restrictions on the way in which mixed partnerships, those with individual and typically corporate members, allocate profits and losses.
George Osborne has also announced that from 5 April 2015 married couples and civil partners will have a limited ability to transfer personal allowances.
Whilst it is unlikely that we will see a return to direct tax relief for mortgage interest payments, the historical mortgage interest relief at source (MIRAS), Mr Osborne may be tempted to offer something to his back-bench MPs to placate their concerns.