What now.....

As David Cameron settles in to Number 10 and the shape of the coalition government between the Conservatives and Liberal Democrates emerges, here is an overview of the areas expected to feature in the oncoming Emergency Budget.

- The planned rise in national insurance is unlikely to go ahead

- The proposed £6 billion of cuts to non-front line services to go ahead

- Capital gains tax (CGT) is likely to rise on 'non-business' assets.

- The Lib Democrats's 'mansion tax' on houses that are over £2 million is likely to be scrapped.

- Plans to increase the inheritance tax threshold to be put on hold

- The introduction of Liberal Democrats' proposed cut to income tax for lower paid workers on the first £10,000 of earnings.

- Marriage could be recognised in the tax system. The Liberal Democrats have agreed not to block the Tories' proposed tax break for married couples, but do not support the policy.

More comment……..

As we wake up to a new coalition government – at last – it looks as though we may be able to look forward to a reasonable future, perhaps the best of all possible worlds.

Lower income families can look forward to an extra £700 in their pockets as one of the main planks of the new coalition is that the Conservatives will support the Lib Dem’s proposals to raise personal income tax allowances to £10,000. We don’t yet know when it will happen but it is something to look forward to. There might, however, be clawback of the higher tax allowance - as currently exists with the higher personal allowances given to the elderly which progressively brings their allowances back down to the same level as the under 65s as their income rises.

We won’t be seeing the inheritance tax starting point going up to £1 million any time soon – but that was never really on the cards anyway. With a transferable allowance of £325,000 per person, very few families pay IHT anyway and numbers will fall. As a quid pro quo we almost certainly won’t see the introduction of the ludicrous ‘mansion tax’ of 1% a year on the value of properties worth more than £2 million proposed by the Lib Dems.

We might see the abolition of the much disliked Home Information Packs (although it is an EU requirement to produce an Energy Efficiency Certificate and that will remain). This costs nothing and the abolition of HIPs would be a help to get the housing market moving again. This is not likely to be a priority however.

But don’t start celebrating. A £10,000 personal tax allowance costs around £12 billion to implement if there is no clawback – coincidentally almost exactly what a rise in VAT to 20% from its current level of 17.5% would raise. Neither the Conservatives nor the Lib Dems ruled out such an increase in their respective manifestos.

Reforming Stamp Duty, due to rise to 5% on property valued at £1 million and above, won’t be a priority either although there might be a suspension of the 5% rate, due to be introduced in 2011. In the March Budget, Alistair Darling said that he would use the extra revenue from a permanent increase in the top rate of Stamp Duty from 4% to 5% to fund a two-year suspension of the 1% rate on homes bought by first-time buyers that are worth between £125,000 and £250,000.

It will be interesting to see how quickly the new coalition moves to produce a Budget. Cameron committed the Conservatives to producing one within 50 days but it might come sooner. Depending on how soon public spending cuts are introduced – which incidentally don’t need new legislation and could have been introduced by a minority Conservative government without support from the Lib Dems – we might also see tax rises in VAT and Capital Gains Tax, which is likely to rise from the current 18% closer to 40%.

The abolition of higher rate tax relief on pension contributions – a Lib Dem Proposal which raises a very useful £5.5 billion to replenish the Treasury coffers – is a very real possibility and redresses a very unfair situation where most of the tax relief goes to wealthier individuals who pay higher rate tax. This could be tempered with a promise to introduce more incentives for lower income families to save at a later date - such as an increase in Child Trust Fund vouchers paid to families on benefits or a new saving scheme – which has been piloted by Gordon Brown’s government – of matching savings, pound for pound.

One thing is certain we are in for interesting times ahead as not only a new government but a new style of government hits the UK.