With less than a week to go before the emergency budget, I was asked this morning (from a recruiters perspective), about the general consensus from my clients and candidates in the market,  on what the UK faces after next week’s announcement from the Chancellor. I responded by saying, ‘probably 80% apprehension, 20% optimism’. Everyday I read the financial section of a newspaper, it’s the same rhetoric,  George Osborne has to do something about reducing the UK’s £163bn budget deficit, but at the same time limiting the punishment to the public and investors alike that would come with aggressive tax hikes.

The key issue facing everyone is Capital Gains Tax. Currently standing at 18%, this could rise in line with income tax, although recent public outcry may in actual fact have caused Osborne to reconsider such an aggressive stance. Ultimately, anyone holding significant investment assets – second homes, buy to let properties, stocks and shares etc, are almost certainly facing much higher tax bills when the time comes to sell those assets.

Banks could also be in the firing line. The Conservatives have stipulated they may levy a unilateral tax on banking activity, to punish them for the credit crisis, although this thought failed to gain support at the G20.

Finally, economists believe VAT will be hiked to 20% from 17.5%. Although this may not officially come into play next week, retailers argue that the impact of this would cost over 160,000 jobs over four years as consumer spending, employment and economic growth would all be hit. On the flip side of this, it could generate an additional £12bn for the government.

Tonight’s Mansion House speech will be George Osborne’s first chance to deliver a snippet of what there is to come. It is clear that drastic action is needed, but careful management is also required to stop London and the UK from suffering, and the capital from potentially losing it’s long-held status as a powerhouse in the global financial markets.

Capital Gains Tax, Emergency Budget