Brown Hints At UK Tax Cut

by Jason Gorringe, Tax-News.com, London

11 November 2008

It is becoming increasingly likely that the UK government will use this month's pre-budget report to announce tax cuts after Prime Minister Gordon Brown said on Monday that the world's major countries should act in unison to loosen fiscal policy to counter a deepening recession.

"What I am determined to do is to get all countries around the world trying to get their economies moving again and one way you can do that is by putting more money into the economy by tax cuts or by public spending rises," Brown told the UK's GMTV programme on Monday morning.

While the Treasury has dismissed growing speculation over the government's plans for the pre-budget report, which could be announced next week, it has become apparent that plans for an 'austerity' budget in 2009/10 have been ditched in favour of tax cuts funded by more borrowing with the economic climate seemingly worsening by the day.

The focus of the tax cuts is expected to fall on low and middle-income earners, with relief coming in the form of a temporary cut in rates, or the manipulation of tax bands. With the government reluctant to cut spending, such tax cuts are likely to be funded by more borrowing. It is thought that the tax cut package has been costed at GBP15bn.

Last week, tax advisors KPMG predicted that Chancellor Alistair Darling would provide additional tax relief for the hard-hit property market by relaxing stamp duty rules for property investment funds. The firm also predicted that the Chancellor could extend the list of services qualifying for the reduced value-added tax rate of 5%, and tinker with income tax, capital gains tax and inheritance tax thresholds.

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