Millions of people are going to be hit by the substantial tax changes that will be effective from next month (April 2010) but as these reforms were set some time ago many of them will have been forgotten by the ordinary man in the street and that is why they are often referred to as stealth taxes.
This has been a feature of Gordon Brown's Chancellorship from his very first budget in 1997 and is continuing with the current Chancellor Alistair Darling.
Darling in his last years budget announced that fuel duty would rise by 1p a litre in real terms between 2010 to 2013 and that means 1p plus inflation as measured by the retail price index. This will come into effect on aptly 1st April 2010 (April fools day). The increase will be geared to the projected inflation figure for the third quarter of this year which will be released with the budget on 24th March and some thing in the order of 3p a litre is anticipated.
In his 2008 budget Darling introduced a one off tax increase in Vehicle Excise Duty (VED) on all new cars that are registered after 1st April 2010 (again April fools day) this tax is commonly referred to as "Showroom Tax". Like all Stealth taxes this has not been picked up much by the press and many car dealers report that clients are generally unaware of it. The way that this works is that people when buying a new car with the 10 number plate will face quite a large tax increase which could amount to £1,000 in some cases.
Some examples of the show room tax are:
Audi A4 £125 BMW 5 Series £550 Mazda R8 £950
The purpose of the tax is to apply a higher tax to high emission vehicles with a higher initial rate of VED in the first year. However thousands of ordinary working class people with medium sized cars will also be hit with a tax amounting to hundreds of pounds.
For example somebody buying a Honda 2.0 IVTEC which is in band J will be hit with a first year duty of £425 compared with a current cost of £215.
Then we have stealth taxes on ordinary peoples pensions.
From April 6th 2010 the Government will dramatically reduce the pension benefits for millions of workers in what is being called yet a further stealth raid on peoples retirement funds. There are more than 6 million people who earn more than £31,800 per annum who are building a smaller state second pension. This is known as a S2P and it is designed to provide a top up to the basic state pension and was previously called serps.
The government have frozen the upper earnings limit for eligibility for the S2P at £40,040 last April and previously it had increased year on year ,as you expect it to, and at the same time the rate at which S2P will build up halves from 20% to 10% above £31,800.
It has been widely reported that the revenue generated by stealth taxes and by allowances and tax thresholds which are frozen, with no inflation linked increases (as one would naturally of course expect) are increasing dramatically.
Stealth Taxes have increased from £69 billion in 1997 when Gordon Brown became the UK Chancellor of the Exchequer to a staggering £125 billion in 2010 is a massive increase of nearly 80%.
The currents government slogan is "A future fair for all" and I am beginning to wonder if this is going to be a fun fair?
Or perhaps to put it another way do you want a second trip on Gordon Brown's magic round about economy known as the Titanic?
Author Resource:
The Author writes many articles on UK Income Tax and Pension Planning for more information please go to PAYE Reclaims
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