Tax Rebates & Refunds

Accountancy firms warn of sharp tax rises

April 26, 2010
Posted in Income Tax — Written by admin
Taxes set to rise

Taxes set to rise

Several accountancy firms have warned of sharp tax rises following the General Election – no matter who wins.

The most lucrative income streams for the Government are income tax, National Insurance and Value Added Tax and they are all likely to be used to reduce the massive defecit the country now faces.

Mike Warbuton of Grant Thornton explained:

“The manifestos just give the good news, but within two months of the election the government is going to have to start raising taxes. The markets will demand this. Spending cuts take time, and the job losses that result from big cuts won’t be acceptable – for example, cutting public expenditure by £25bn is equivalent to sacking a million public-sector workers. It can’t happen. The quickest route to start to address the deficit is taxes.”

John Whiting, tax policy director at the Chartered Institute of Taxation, added:

“The overwhelming majority of the tax take comes from VAT, National Insurance and income tax. It’s these taxes which will be needed to do the heavy lifting to help close the deficit.”

Predictions of which taxes will be used and by how much they will be raised are qwide ranging, but it seems certain that VAT will be a target for all three parties.

Currently at 17.5%, most predict either a rise to 20%, more inline with the rest of the EU, or an end to the zero VAT rate on food, children’s clothes, books and newspapers.

That’s not likely to rise to 20% straight away, more like 5% says Tony Bernstein of accountancy firm HW Fisher.

While this will make the things we buy more expensive and raise, it is estimated, £12 billion, it won’t be enough.

Income tax will be targeted at some point and, as one accountant said, “this can’t all be paid for by the rich.”

That means that all of us are going to get hit in the pocket via income tax and, probably, National Insurance once the General Election is over.

This akes it doubly important that you check your tax code to make sure you are paying the right amount of tax and that you claim any rebate you might be due – it looks like you’re going to need it.

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