Tax hikes forecast in 2015
As the 2015 general election looms closer, the subject of tax hikes continues to gain momentum amongst political parties. With socialists claiming less spending cuts and more tax hikes is the most suitable, balanced answer to Britain’s deficit, a recent article published by Paul Johnson from the Institute for Fiscal Studies, ‘Whichever way you cut it, taxes need to rise’ insists that increasing taxes in the UK is not necessary, or perhaps even viable.
Despite attempts by the government to reduce the deficit, borrowing figures for 2014/15 are worse than the £98 billion forecast in March this year, and tax revenue has not met expectations. It was therefore concluded in Mr Johnson’s article that in order to eradicate the deficit there needs to be spending cuts to at least match this figure, which would be unfeasible without the adverse effect on public services.However, the Prime Minister declared in yesterday’s Conservative party conference that if the Tories are successful in the 2015 election, they would secure a £7.2 billion tax cut. This has subsequently raised inevitable doubts from Treasury officials, who are concerned that the complex situation surrounding public funds would be undermined when relying on the already constricted tax base to halt the rising deficit.
So how does Mr Cameron believe his party can achieve this tax cut?
The Conservatives plan to increase personal income tax allowance to £12,500 by 2020, which will accumulate a £5.5 billion bill. There are also plans to become more dependent on the country’s super-rich, following the introduction of the higher threshold of £50,000. The underfunded cost of both these cuts makes up the promised £7.2 billion tax cut, and an insistence by the PM that the UK’s books will be balanced by 2018.
Nevertheless, despite David Cameron’s optimistic post-election plans, the UK’s tax burden is already forecast to rise to 38 per cent of GDP as of next year. This is the highest figure that any party in power has generated, regardless of tax rates.
Therefore I fully suspect that irrespective of who comes into power next year, tax hikes and heavier cuts in spending are more than likely.
As a result, more and more people will inevitably be looking to mitigate their tax liabilities and protect and maximum their wealth more generally through specialist, offshore solutions.
Universally-recognised as the world’s leading cross-border financial advisory organisation, deVere will be, as ever, able to help clients affected by the likely tax hikes reach and even exceed their financial objectives.