The article highlights the change in tax rates in the recently announced UK budget. The Conservative Party, since 2010, had focused on debt reduction during budget planning. This had led to adverse impacts on the country’s growth. As a changed strategy, the new budget aims at boosting the nation’s economic growth. To achieve this objective, the government has lowered taxes for the people in topmost income-tax bracket and also on businesses. Personal-income tax rate, for incomes over £150,000, have been reduced from 50% to 45 % for April 2013. This, however, entailed a political risk of being marked as a pro-wealthy government. To avoid this image, three adjustments have been made in the new budget. First, tax on purchase of expensive property has been increased. Second, government has announced taking strict measures to avoid incidences of property tax aversion. Last but not least, additional two million people have been exempt from paying income tax. This has been achieved by increasing the threshold level for paying tax from £ 7,475 to £ 9,205.
Corporation tax rates have also been cut from 26% to 24%. A further cut of 2 % is planned in the next two years, which will bring down the corporation tax rate to 22%. To ensure that banks do not benefit from this, UK’s bank levy has been increased.
If the planned corporation tax rate cuts happen in the next two years, the corporation tax will fall in line with the tax rate for small companies. In spite of small companies facing greater survival and profitability challenges, there is nothing for them in the new budget. Hence, exploring the option of reducing small company tax rate or reducing capital gain tax for them is recommended. Also, government should make special provisions for compensating loss making small companies through schemes like national insurance contribution holidays.
Rather than incorporating more checks to reduce tax aversion on property tax, it is recommended to reduce the stamp duty. This way people do not have incentive to go to experts to find a loop hole in the system to avoid tax. While reducing the personal-income tax rate for the topmost bracket, it is also necessary to implement this reduction in the lower income tax brackets.
Works Cited
Bryan-Low, Cassel and Ainsley Thomson. “U.K. Cuts Taxes on Rich, Businesses.” Wall Street Journal, 21 Mar. 2012. Web. 24 Mar 2012.
