Michael McCusker: A new tax regime is inevitable soon, so check your options

It has already been announced that 6bn of savings will be made through cutting spending, and it is almost certain that further cuts will also be announced. However, this is only half of the coin. Tax rises will also contribute to the overall solution.

While the full details of the government's proposed tax rises are unlikely to be known until Budget day, some are already available as part of the published coalition agreement.

Capital gains tax (CGT) is likely to be the most radically affected tax in the Budget. Currently all gains are taxable at a flat rate of 18 per cent, with the first 2 million of gains on business assets taxed at 10 per cent under entrepreneurs' relief. The most likely change is that the CGT regime will revert to a distinction between business and non-business assets. Capital gains on non-business assets are likely to be taxed like income (meaning rates of up to 50 per cent), with certain reliefs for business assets.

It is unclear whether the reliefs on business assets will be an extension of entrepreneurs' relief, or a reversion to the old system of business asset taper relief where the longer assets were held for trading purposes, the lower the rate of tax. It is also unclear when these new rules will come into force. Historically, the CGT regime only changed at the beginning of a tax year in April. However, given the severity of the budget deficit it would be unsurprising if these changes commenced on 22 June.

All private investors should now, as a matter of urgency, consider whether to sell investments before Budget day, to benefit from the current relatively low CGT rates – and if the best sales price for assets can be obtained now. If this is problematic then well-advised individuals may even look to accelerate gains by selling to connected parties to crystallise tax now at 18 per cent rather than being exposed to higher future rates.

While income tax rates are unlikely to change, it has been announced that the personal allowance (the amount of income an individual can earn tax-free) will rise "significantly" from the current level of 6,475. The exact increase is unknown but it is possible that from April 2011 it may rise to 8,000. While this is likely to reduce the tax burden on lower earners it is confirmed that the 50 per cent band that applies to income earned over 150,000 – introduced by the previous government – will remain in place. However, the key question will be whether this threshold will be reduced, or if a further additional top rate of tax will also be introduced, as no commitment has been given on either of these possibilities.

VAT rates are also likely to rise as part of the Budget. The downside to increasing VAT is the knock-on effects on inflation, which will put additional pressure on the public's private finances. The risk is that if VAT goes too high then spending will fall, throwing the economy back into recession. This is clearly a tightrope on which the government will wish to keep themselves finely balanced.

In addition, part of the National Insurance (NIC) rises proposed by Labour for April 2011 will still proceed. It is likely that the proposed increase of 1 per cent in the level of employee contributions will go ahead as planned, with the employer's increase of the same amount being reconsidered. The exact details are unclear, but any reductions on the proposed NIC increases will be welcomed by businesses trying to control their costs.

Finally, it is confirmed that the nil rate band for inheritance tax (IHT) will not increase to 1m as proposed by the Conservatives, and any future amendments to reduce IHT are likely to be postponed for a considerable period due to the difficult position of the public finances.

Whatever planning is implemented over the coming weeks, expect further change and more tax increases.

Michael McCusker, head of private client business, PricewaterhouseCoopers LLP in Scotland.