While the government have long been on the trail of the mega rich Private Equity companies , the companies which are seen by many as asset strippers, will the recent capital gains tax changes have the desired effect? 

Prior to the recent budget, Private Equity investors were able to reduce their tax burden down to a minimum of 10% by holding their investments for a certain length of time.  This was supposed to be their reward for investing into companies which may have been in financial trouble, or required additional investment.  Then the authorities turned against them!

The government recently pushed through an across the board change to capital gains tax rules which set a flat rate of 18%, rather than the current 0% to 40% formulae, which depended upon what you bought, how you bought it and how long you kept it.  So now the 10% rate for the Private Equity companies has gone, but so have a raft of incentives for the traditional worker!

For years many companies such as Tesco have used SAYE (Save As You Earn) schemes to encourage their employees to invest (tax free) into shares in the company.  Under the old government rules they were allowed to take any profits free of tax if the shares were held for a certain length of time (often 3 years).  However, in their quest to attack the rich, the authorities have inadvertently brought the normal worker into play and taken away what little tax incentives there were for investing in SAYE and other similar schemes

The changes have also effected the small business person, where under the old rules they were allowed to taper their tax relief the longer an asset was held.  Under the new rules many will see their rate of tax increase from 10% to 18%, and these are not companies or business people earning millions of pounds!

Under pressure from the opposition, the Labour government have pushed through some last minute changes to the inheritance tax laws, which were announced in yesterdays budget speech.  New laws mean that married couples and civil partnerships can now claim a combined inheritance tax allowance of some £600,000, and this figure is set to rise to £700,000 by 2010.  So what does this really mean?

While the change has grabbed the headlines, there are many who are sceptical about what it actually means in practice.  Currently all assets lef to a spouse in a will are free of inheritance tax, so there would be no savings here, however, when the second partner dies (assuming the first used none of their inheritance tax allowance) they will be able to shelter the first £600,000 of their assets from the tax man.

When you consider that the average rice of a house in the UK is currently around the £200,000 mark, there are very few people who would actually use the combined £600,000 allowance.  However, it will offer comfort to those whose partner has passed away, as they will be able to claim the combined allowance on a backdated basis.  When you consider that Gordon Brown had 10 years as Chancellor to change the inheritance tax laws, many are scathing of his reasons for doing it now, i.e. the pressure exerted by the Tory party.

What was clear in this years budget was the fact that the UK economy is slowing and the business environment will become tighter over the next few years.  Gordon Brown has until at the latest 2010 to turn around the economy and announce an election, which he hopes will probably coincide with an up turn in the economy.  After 10 years of smash and grab, there are many privately thinking it is may be pay back time for the ex-Chancellor.

Having waited 10 years to be shoe horned into the role of Prime Minister, he may well experience a very difficult tenure - one which may well turn out to be his last.

A shocking new report on the taxation burden in the UK has uncovered the enormous amount of YOUR money which goes to the government via an ever changing array of up front taxes and stealth taxes.  The report was released by the Tax Payers Alliance who, using government released data, calculate the average household tax bill over a lifetime is a massive £630,000, with even the poorest households paying some £230,000!

While the figures are enormous and you may be wondering where you actually pay all of this tax, you will probably have guessed a large chunk is collected via so called “stealth” taxes.  Since Labour came to power in 1997 the tax burden on the UK population has doubled, and “stealth” taxes have been the secret mole burrowing into your income and savings.  So how do the authorities get away with it?

While there have been a  number of critical reports “buried” by the government, Gordon Brown has been warned by his overseas counter parts that he needs to operate a more transparent taxation system in the UK.  One which is up front and clear about exactly what you are paying, why you are paying, and where it all goes.  So will it get any better now Gordon Brown is PM?

In the short term, as we approach what many believe to be the next general election, we can no doubt expect a raft of delayed tax increases, hand outs and “better prospects”, but these are just sweeteners to secure your vote.  Whether the taxation system in the UK would be any better under an opposition government remains to be seen, but surely it could be no worse?

As the week progresses we are seeing more and more new policies and ideas emanating from the Conservative Party conference in Blackpool.  One issues which the Tories have highlighted is tax, and they have offered a number of concessions to the UK public should they be voted into power at the next general election.  However, even now there is some confusion as to whether the figures actually add up, so what exactly are these proposals ?

A number of the main proposals include :-

· The abolishment of inheritance tax. 
· An increase to tax beaks for married couples.
· The abolishment of stamp duty for first time home buyers.

These are just a number of new proposals coming from the Conservatives as they prepare for what many expect to be a snap election later this year, 

Unsurprisingly, the Labour Party have hit back at the calculations from the Conservative Treasury department, claiming that they just do not add up and they will leave a “black hole” in public spending.  They claim that this will lead to a reduction in spending on public services - something which the Tories refute strongly.

The truth is that all calculations, from all parties, at this stage are based on theory and not fact, although the Conservatives have used the most up to date figures available.  While they say a week is a long time in politics, it is even longer to the next general election!

Things can and regularly do change and as we all know, what the parties say now is not always what they actually deliver.  Over the next few weeks we will all be the subject of a “softening up” process ahead of a potential election - something which we are becoming more and more used to.  It is also something which gives politicians a bad name, highlighting the reason why so many are distrusted by the public!

While each day seems to bring a new tax, increasing taxes and talks of government budget shortfalls, many investors should be checking that they are making full use of the tax efficient investment vehicles on offer.  Whether you are looking at ISAs (Individual Savings Accounts), a self-select pension fund or trusts, you really do need to ensure you are savings as much tax as possible - after all they are designed to help and encourage you to invest!

The government has recently increased the annual limit for ISAs to some £7,200 per person per year, while the rules on contributing to your pension scheme are fairly flexible, with tax incentives to encourage you.  The subject of trusts is a little more complicated and while it would need specific advice for individual cases, there is real potential to protect some of your assets from both income tax and inheritance tax.

It seems amazing that despite the number of high profile tax efficient investment vehicles on offer, many people still tend to invest in their own name, incurring both income tax and capital gains tax (if you make a profit!).  Perhaps it is time that you took a look at your assets and started to plan ahead for the future.  Short term strategies are ok as a stop gap, but they need to be amended at some stage and the recent increase in property prices has opened many peoples eyes to potential tax liabilities in the future.

It is never too late to start, but you really do need to consider the situation carefully.

Despite all of the back slapping and hand shakes about how they have changed the NHS, the UK authorities are under severe pressure to improve the return on investment.  A report out this week has been very critical of the funding arrangements for the NHS and their ultimate use. So what next?

As every tax payer in the UK will be aware, the budget for the NHS seems to grow and grow (if we believe government figures) yet the services seem to be getting worse in many areas.  A recent government sponsored report was released to calls of “we told you so” from many in the industry who have been very critical of changes and movements within the NHS.

There has been a massive increase in management, red tape and an introduction of the competitive internal market within the NHS, over the last few years.  These changes have not assisted with the level of care on the front line, and caused much anger and unease with many workers.  We are also experiencing an increased level of industrial action from the main unions, who are fighting for the future of the NHS.

So what does this mean in the long term?

It now seems inevitable that at some stage, the tax payer will not be able to depend upon the NHS in its current form.  We have for some time seen more and more services farmed out to the private sector, where charges are introduced to what have been free services.  We have also seen a massive growth in the area of private healthcare, and this is sure to continue and grow in the years to come.

Unfortunately, the NHS is not a bottomless pit and at some stage there will need to be a major restructuring of the original format.  Times have changed and costs have spiralled over recent times, reaching levels that have denied many people the treatment which they have “paid for”. 

Private healthcare is the way forward for many who are looking to protect themselves and their loved ones in the future.

While the tax credits system has been under major pressure of late, the announcement that officials from HM Revenue and Customs have actually broken their own rules regarding the reclaiming of over paid tax credits has set more alarm bells ringing.  The cost of this “oversight” is rumoured to be in the region of £500 million, although the authorities insist it is nearer £20 million.

It seems as though a number of claimants over the last few years were unaware of the fact that their payments were being investigated, with many receiving unexpected demands to repay “over payments” from prior years.  Under strict guidelines the authorities should have written to each claimant being investigated, to make them aware of the situation and what may happen - this task was not carried out for many.

To say that the tax credits system has been a shambles is an understatement, with literally billions of pounds of tax payers money wasted.  What was in theory an excellent idea has turned into a nightmare for the government, and Gordon Brown in particular who introduced the system.  It seems that while many claimants had informed the authorities of changes in their situations, the information was never logged into the relevant systems and over payments / under payments have been common place.  The literature which was sent to many claimants was also very hard to understand, with figures changing on a regular basis!

There have been numerous attempts to resolve the problems with the system but it seems that each resolution is followed by another problem, and the authorities are currently in disarray.  Quite where this leaves the long term viability of the system remains to be seen.

While the UK has one of the best public service systems in the world, the cost of funding this continues to grow, often forcing an increase in taxes.  There are many in the UK who argue that even though taxes have gone up, the quality of public services has gone down.  However, surprisingly, a recent survey indicated that the majority of UK tax payers would actually agree to higher taxes if they could see where their money was going.  Will this ever happen?

The problem with the UK government is their record on wasting money, with computer systems billions of pounds over budget, the tax credit system in disarray - with billions of pounds outstanding, not to mention the mammoth cost of setting the system up.  There have also been hundreds of other schemes which have gone well over budget, including among others the infamous Millennium Dome.  How can the authorities regain the trust of the UK public?

Government, trust and the public are not three terms which normally go hand in hand, with the public often sceptical of where their taxes actually go to.  Perhaps a more transparent system would work better if the tax payer could actually see where their money was going, which departments and if it was working.  One of the main gripes against the government has been the fact that all of the many budget over spends actually come out of the tax payers pocket, when in business there would be compensation and penalty payments if projects were not brought in on time, and on budget.

A more transparent system would give the public more confidence - that is assuming that the government have nothing to hide!

While there are literally millions of people in the UK who at one time have over paid their taxes, it is never easy to claim your over payment refund.  Whenever you owe the government tax, they will be on to you in double quick time, but it is not quite so simple when it is the other way around.  This begs the question, are you paying the correct tax?

There are a number of reasons why your tax code may change throughout your life time, which include marriage, age, retirement, etc.  As you would expect, the authorities are very keen to put the onus onto you to ensure that your tax code is correct.  In the event that you have been charged too much tax, then you are able to apply for a rebate, but this can often be a long and tedious process bearing in mind there are potentially millions of UK residents in the same situation.

To ensure that your tax code is up to date, it is vital that you check the tax code on your next pay slip against the codes listed on the following internet page :-

UK Tax Codes

Is it correct? Does it relate to your situation?

There are also an array of tax free allowances which you may be able to utilise which are listed on the internet page below :-

UK Tax Allowances

It is essential that you monitor your tax situation, what you are paying and what you expected to be paying.  If you don’t help yourself, you can guarantee that the authorities wont!

Over the last couple of days we have seen both the Labour and Conservative Parties going head to head on the subject of taxes, and specifically the much disliked inheritance tax (set at 40%).  The announcement that the Tories would consider abolishing the tax if they were to win power at the next election has been met with laughter by Labour ministers, but is that the true picture?

Since the fall of the last Conservative government, the Labour party have increased both tax income, increased spending on public services and presided over a strong economy - well that is what they may have you believe.  Underneath the headline grabbing economic figures, there is a different picture with Gordon Brown regularly accused of double counting and using smoke and mirrors in his time at the Treasury.

Subtle tricks such as increasing allowances below the rate of inflation have allowed the Labour party to boast that allowances have always gone up, when in reality they have been falling in real terms for many years.  The inheritance tax threshold is one such tax allowance which has increased by no where near the rate of inflation, never mind the rise in house prices - which make up the bulk of an individuals asset in the UK.

The current government claim that only 6% of estates actually pay inheritance, but there are many who believe that this figure is set to increase dramatically over the next few years.  The current threshold before tax is paid on an estate is £300,000, a figure which is set to rise to £350,000 by 2010.  Against an average UK house price of £150,000 this may not look too bad, but a recent report has claimed that more than four in ten homes will be valued over the inheritance tax threshold over the next 5 years - resulting in a massive increase in inheritance tax income for the government, especially when you add on other assets held in an estate.

We seem to be falling back in to the traditional tax and spend debate which has so often been the main difference between Labour and the Conservatives.  The fact that Gordon Brown was Chancellor when many of these “stealth” taxes were introduced should make for some interesting debates over the coming months.