While everyone else is focused on short term predictions I'm going to have a go at predicting what will happen in 5-10 years time (ie: between 2006 and 2011) assuming there's no change of Government:
- The top rate of income tax will be increased to 45% on incomes over £100,000;
- The rate of CGT will remain linked to the income tax rate so as to avoid incentivising the conversion of income into capital;
- The small rate of corporation tax will be abolished after moving closer to the standard rate;
- The tax credits system will suffer constant tweaks in a continued effort to disguise the fact that it's not fit for purpose;
- Tax relief for pension contributions, favoured investments and personal allowances will only be given at basic rate;
- A statutory rule will be introduced to determine whether or not anyone is UK tax resident in each tax year;
- The merged Inland Revenue and HM Customs & Excise will become known colloquially as iTax;
- A tax scheme disclosure rule will require the promoters and users of all tax avoidance schemes to make themselves known to iTax - and this will move more tax avoidance underground;
- Non Doms will have to pay an annual fee if they want to avoid paying UK tax on worldwide income and gains;
- National Insurance charges will be increased by 0.5% and it still won't be called a 'tax';
- Electronic filing of all tax returns will become compulsory;
- Employers will receive an incentive payment to operate the PAYE system and pay witheld taxes over on time each month;
- The IHT nil rate threshold will become transferable between husband and wife;
- The tax rules will be changed so as to encourage one man businesses to incorporate and then, after a short time, there will be a crackdown on the tax efficiency of one-man companies;
- VAT will be reduced to 15% for a 13 month period to 'stimulate the economy';
I didn't do badly now did I?!
OK - I admit it. I didn't predict all this 6 years ago. I doubt anyone could have done so - especially that last one!
This post was inspired by one written in a similar vein on a more general topic by Seth Godin. In it he notes how impossible it is for us to predict what life is going to be like just a few years into the future. He suggests that "being ready for anything is the only rational strategy."
Accountants and tax advisers have always known this. The constancy of change is one of the best known characteristics of tax work. It was one that attracted me into the profession over 25 years ago. And it was also one of the reasons I stopped being a tax adviser and set up the Tax Advice Network.
As we move into 2009 with the economy in recession I hope that the tax changes that are to come this year and over the next few years don't cause you to want to give up giving tax advice too.
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