After all the talk of coalitions, pacts, deals and electoral reform what does the Conservative / Liberal Democrat coalition actually mean to your finances? How will it affect the pound in your pocket?
Here we take a look at the main headlines, which seem to be dominated by a proposed rise in Capital Gains Tax (CGT), the abolishment of compulsory annuitisation, changes to personal allowances and a change to the Inheritance Tax Proposals of both parties.
The indications seem to be that CGT will rise from 18% to 40% for all gains arising for non business related activities. This will certainly hit those with investment portfolios, buy to let properties, holiday homes and the like. There is no word as yet what will happen to the annual CGT exception, i.e . the gains that can be made without any tax liability. However gains made by business people and entrepreneurs seem to be exempt from the proposed rise, in an effort to encourage businesses to grow.
The agreement between the two parties signals the end to the requirement to purchase an Annuity at age 75 and also the scrapping of the compulsory retirement age. It seems that the State Pension Age though will definitely rise to 66, although the earliest that this can be increased for men is 2016 and for women 2020.
The Lib Dems have promoted the benefits of raising the personal allowance, which is the amount you can earn before you pay tax, to £10,000. It would seem that during negotiations that they have partially convinced the Tories of the benefits of this position. From April 2011 a higher personal allowance will be introduced for those on “lower and middle earnings”
The two parties entered the election race with very different proposals on Inheritance Tax (IHT). It would seem that both parties have moved a significant distance, the Tories plan to increase the IHT allowance to £1m has been dispensed with, as has the Lib Dem ‘mansion tax’.
Another Tory proposal that may be kicked into the long grass is the tax breaks for married couples, whilst still officially on the agenda it would seem that it is a long way down the list of priorities for both parties.
Finally, there will be a curtailing of tax credits and the Child Trust Fund will be abolished in an effort to concentrate resources.
The proposals are just that at this stage, an Emergency Budget is planned within 50 days of the Conservative Party taking power, however it is highly unlikely that the changes will be radically different at this time of belt tightening for the government and electorate alike.
