Future of the 50% Rate of Tax

BUDGET 2010 (CON-LIB)

Synopsis: Hope given for its abolition  

The front page of the Telegraph on Saturday 22nd carried the headline ‘Cameron vows to cut taxes’.  In an exclusive interview with the Telegraph the PM promised to deliver lower taxes as soon as the economic conditions allowed.

Here are some of the key points

• 50p tax could be scrapped if it were shown to be bringing in insufficient revenue – a clarion call to financial planners if there ever was one – the more effectively we can legitimately avoid the additional rate of tax the more likely it is to be abolished.
• Inheritance tax still thought to be unfair.
• ‘I absolutely do believe in lower tax country and I want to deliver lower marginal rates of tax.  I am still a low-tax Conservative.  Born one, lived one, will die one’.
• We don’t like high marginal rates of tax.  They are not good for the country’.

WEALTHFLOW COMMENT:

All reassuring – and also not surprising.  The key is in the ‘as soon as economic conditions allow’.

This is likely to mean that we have a little while longer to wait to see any serious change to the higher taxes across the board that we are now living with and which may increase further after 22nd June.  There is also the impact of the need to maintain agreement within the coalition which is also likely to throw into question any significant reduction in tax.

The importance of tax planning as part of the financial planning process has accordingly increased substantially.