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Short-term pain long-term gain

As government forecasts for the performance of the UK economy in the short, medium and longer term come under more and more scrutiny there is no doubt that UK taxpayers will be in for a period of "short-term pain and long-term gain" with regards to taxation. However, the level of pain felt could increase substantially if the UK government's economic forecasts are found to be overly optimistic in the run-up to the next general election. So what can UK taxpayers expect?

Even though there would be an obvious increase in income tax in the short to medium term, if the economy does not perform as expected we could see a substantial increase in indirect taxation, otherwise known as stealth taxes. This could include upping the rate of VAT across the country, increasing the number of products and services under the VAT umbrella and the old-fashioned ongoing increase in fuel tax. While many of these potential tax increases will not register immediately with UK consumers they will soon be felt in the pocket!

On the plus side, as the UK state pension liability continues to mushroom out of control we should see more pension friendly taxation laws introduced in the short to medium term. However, whether the vast majority of people will be in a position to take advantage of these potential changes is very much open to debate.

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