How to budget responsibly

You can loosen your belt a notch or two – the UK government is going to borrow £8bn less this year than we first thought. We only need to run up public debt of £155bn instead of £163bn, according to figures from the new Office for Budget Responsibility.

But, with the Emergency Budget only a week away on 22 June, the OBR forecasts may be ‘ripped up in record time’ says the Telegraph.

Small businesses are waiting to see what George Osborne has in store for them.

VAT is high on their list. Some analysts are predicting that though VAT will be raised to 20%, this will only come into effect from 1 January next year (given that businesses have only just gone back to 17.5%). And that there will be changes to the zero and reduced rate categories.

Then there’s capital gains tax. Accountants Grant Thornton believe CGT could go up to 40%, but taxing up to 50% has not been ruled out. Interestingly, they say there is no ‘over-arching evidence’ that raising capital gains tax necessarily translates into more revenue raised.

When CGT was moved to a flat rate of 18% just a few years ago, that figure was chosen because global research showed it was close to the most effective rate for balancing revenue while encouraging investment.

So a steep hike in CGT could limit the funds available to start-ups and budding entrepreneurs.

We’ll wait to see what the Chancellor does on corporation tax and whether the Coalition will stick with the Conservative pledge to reduce this from 28% to 25%.

And finally, will George Osborne announce the long awaited levy on big banks?