Queen’s Speech confirms tax plans

The government used the Queen's Speech to flag up measures aimed at reforming the tax system for both businesses and individuals in order to make it "fairer and simpler".

The National Insurance Contribution Bill restated the government's intention to reverse Labour's plans for a 1 per cent rise in NICs due to come into effect in April 2011.

The Bill will mean that employers will not face a rise in the contributions they must pay. Although employees will still see their contributions go up, the money raised will be used to pay for a staged increase in the income tax personal allowance threshold, the long-term aim being to lift it to £10,000.

The government said that under the full changes most people would be "better off relative to the previous government's plan, and relative to no changes, all low and middle income employees would pay less tax and NICs overall, and employees on the main rate earning under £20,000 would pay less NICs".

In effect, that may mean that NICs for those earning more than £20,000 but less than £45,000 will increase but will be balanced by the rise in the income tax personal allowance.

A Treasury document released to coincide with the Queen's Speech reiterated the government's commitment to raise capital gains tax on non-business assets.

It stated: "Capital gains on non-business assets will be taxed at rates closer to those applied to income tax."

However, the statement adopted a slight shift in semantic tone compared with previous announcements, which had used "similar" rather than "closer" to indicate the measure of any increase in CGT, suggesting it may be as high as 40 per cent, a 22 per cent jump from its current level.

One interpretation is that, come the emergency Budget on 22 June, the Chancellor, George Osborne may now choose to raise the CGT rate to a level below the 40 per cent income tax rate.

The government also looks set to go ahead with a reduction in corporation tax and with plans to streamline the business tax relief system.