But if you are bailing out banks at a rate of knots its no surprise that you need a sub from the unsuspecting tax payer.

It is perhaps most worrying that the government appears intent on taxing the higher earners. This will be deemed as a penalty against success and sends a message out to the entrepreneurs who make the world tick that the UK is not a place to visit.

As well as a top rate of income tax of 50% from April 6th for those earning above £150,000, Mr Darling has thumped this tax payer again by taking away the personal allowance for those who earn over £100,000. (1)The personal tax allowance is reduced by £1 for every £2 of income over £100,000, so much so that at £112,950 there is no personal income tax allowance at all. Furthermore Mr D has announced that personal allowances across the board will be frozen. If inflation is sitting at 3% we would expect to see allowances increase by that, so this is effectively a £38 per person charge per year.

He has also u-turned previous plans for inheritance tax by keeping the nil rate band at £325,000 and frozen this until April 2014!

Most investors will have enjoyed a fantastic year with the UK all companies sector up over 50% over the last year.(2) 40% of this will now be wiped off if their total assets are over £325,000. If markets continue to grow, each 10% of growth will only net beneficiaries 6% as the nil rate band has effectively been set in stone for the next four years. Astonishing!

Thankfully corporation tax has remained unchanged and Mr Darling has decided to defer the increase in corporation tax for companies with less than £300,000 profit. Nice touch. But on the grounds he put a hole in most of that profit, the difference will be negligible. There has also been an increase in higher rate tax to 42.5% for trusts. And so all round its just tax increases.

Why? On the face of it it's largely down to the forecasts by the treasury that the level of UK debt is set to soar from £776 billion in 2009/2010 to £1.4 trillion in 2014.(3) The general view is that this could get worse as the government has assumed economic growth to hit 3-3.5% per year which is well above the norm and of most experts forecasts. It is expected that the cost of servicing that debt will reach £43bn rising to £63bn per year. To put that into perspective the cost of the NHS last year was £100bn.

On the good news, first time buyers will have a holiday on stamp duty for properties under £250,000 for the next two years. End of good news. At the same time properties over £1m will have an increase in stamp duty of 1%. It's clear to see where the government is going with all this and I wonder how much the weight of the decision to bail out banks will lean on them over the next two months.

A capitalist society allows you to win well and lose well. I have never seen it allowed where you win well, get super greedy and get bailed out for shocking decisions, followed by the ability to overcharge customers whilst at the same time catapult your marketing budget to make yourself more palatable. I must drink with the wrong people.

Such was my shock when a member of staff returned from a meeting with her bank to 'see if she was running her account well'. That’s a bit rich isn’t it? She was in surplus, they weren’t. And you guessed it; it was just the normal lure to sell the life policy, the new loan and to offer her more credit.

As Yogi bear said: ‘it's like that déjà vu all over again, again’.

If you want to speak to an independent financial adviser call Peter McGahan on 0845 230 9876, e-mail info@wwfp.net


1.  FT

2.  trustnet

3.  Standard life

Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. 'The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'

Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.
The above represents the personal opinions of Peter McGahan.
All information is based on our understanding of current tax practices, which are subject to change.
The value of shares and investments can go down as well as up.

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