Taxpayers could be facing drastic new measures when the new government’s economic plans are put into place after it was announced that an emergency budget will take place on June 22.

Conservative Chancellor George Osborne is due to outline the new coalition’s main plans next week, detailing how they will go about making £6 billion cuts in public spending, with the formal budget announcement to follow a month later.

The main aim is to reduce the UK’s £163 billion deficit meaning the proposals are likely to prove unpopular and may include tax rises and VAT increases in an effort to tighten the nation’s belts.

Millions of low-paid workers, including many pensioners, could find themselves better off with plans to increase the income tax threshold. But it is the middle classes who are likely to feel the effects most with a substantial rise in Capital Gains Tax on the cards.

Following the announcement of the next budget the Chancellor has also revealed that an independent Office for Budget Responsibility will be set up to make economic forecasts in the future, headed by former Bank of England Monetary Policy committee member Alan Budd. 

This will ensure that the government is held accountable for its spending by carrying out independent audits and making economic forecasts on which budgets can be based.

Here’s a summary of the coalitions’ main emergency budget features.

Capital gains Tax
Investors are panicking after the new government said it plans to tax non-business assets at a rate of 40 per cent instead of the current 18 per cent.

Property investors now fear it will hit them the hardest, with many planning to sell-off quickly to avoid paying the higher rate.

Income tax
One of the most radical manifesto pledges from the Lib Dems was to raise the personal income tax allowance to £10,000, freeing 3.6 million people from having to pay income tax.

It is thought that this is unlikely to happen in full immediately but a smaller increase will be made now, with more to be introduced later.

VAT
David Cameron has not ruled out a rise in VAT, which could increase from the current 17 per cent up to 20 per cent. This could see the cost of living increasing, with some supermarkets reportedly already  jumping the gun by making price increases.

National insurance
The coalition will implement an increase next April. The standard rate for employees will go from 11 per cent to 12 per cent, and the higher rate from 1 per cent to 2 per cent. Anyone earning more than about £20,000 will pay more NI from April 2011.

Inheritance tax
Tory plans to increase the threshold to £1 million or £2 million for couples are to be put on hold for this budget but may be introduced at a later date.

Capping bonuses
Up to £15 million a year will also be saved by slashing the amount spent on public sector bonuses for civil servants and NHS staff. The Labour government paid out £130 million in bonuses last year, something new Prime Minister David Cameron has described as ‘crazy’.

Ministers have also taken a pay cut of 5 per cent with prime Minister David Cameron cutting his own salary to £142,500 – £7,500 less than the £150,000 Gordon Brown received.

George Osborne says he realises that the emergency budget’s measures will not win him any popularity contests. “I realise this will create a rod for my back down the line and for future chancellors. We need to fix the Budget to fit the figures, not fix the figures to fit the Budget.

“As it the coalition agreement said, deficit reduction and continuing to ensure the economic recovery is the most urgent issue facing Britain. We understand that and we need to get moving.

“Greece is a reminder of what will happen if governments lack the will to act decisively and quickly.”

© Fair Investment Company Ltd