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Olswang Analysis - June 2010
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Stealth tax?
The Government has announced that from April 2012 the measure of inflation used to calculate increases in NICs rate bands, the CGT annual exempt amount and the annual ISA subscription limit will be changed from the retail prices index (“RPI”) to the consumer prices index (“CPI”), and that the default indexation assumption for all direct taxes will be CPI as opposed to RPI.
Although this is a technical change, as RPI tends to rise more quickly than CPI, this means that the thresholds at which individuals will pay tax will rise at a slower rate than was previously the case. The Government has itself estimated the aggregate increase in revenue due to these changes up to the end of the 2015/16 tax year to be in excess of £2 billion.