The Chancellor is expected to tinker with taxes on the wealthy while dodging serious tax rises for the voting masses in next week’s Pre-Budget Report.

“Alistair Darling is facing the most difficult set of economic circumstances for any chancellor since the 1940s, with the projected substantial fiscal deficits for 2009/10 and 2010/11 likely to be revised upwards from £175bn to well in excess of £200bn,” say advisers BDO.

“He must perform a delicate balancing act to secure the confidence of the global financial markets while protecting any fragile economic recovery and boosting public confidence.”

But most commentators believe that politics, rather than economics, will play a bigger part than usual.

“The days of pre-Budget purdah, where absolute silence was maintained on financial policy ahead of such statements, have long since been replaced by ‘kite flying’ leaks to test reaction to potential new measures,” says Jason Hollands, director at F&C Investments.

“Right now, hitting the wealthy – particularly those working in the City – is a dog whistle to parts of the Government’s traditional core voter base who are angered by tales of excessive bonuses.”

But he adds: “However, such kite flying can also be a tactic to manage down expectations so when actual announcements are made, the surprises are more on the upside – for example, despite the limited room for manoeuvre and the overall push towards higher taxes in the last budget, the increase in the ISA allowance was welcome news for savers.”

F&C wants the largesse extended to venture capital trusts, to hit the dual targets of stimulating business growth and giving a rare tax perk to more risk-friendly investors.

Adrian Coles, director-general of the Building Societies Association, says allowing a two-way transfer from stocks and shares ISAs to cash ISAs would give savers more flexibility in managing their money. He adds: “With rising unemployment and many households facing added financial pressures, we also want to see more effective government assistance for people who are confronting mortgage payment issues. Support for mortgage interest currently excludes many borrowers and a fundamental overhaul is required to open it up to more households facing mortgage problems.”

Neil Whyte, tax partner at PKF, expects “some eye-catching traditional Labour moves to increase the tax burden on the wealthiest mixed in with more modest efforts to support business”. Whyte predicts a cut in the upper income limits for means-tested benefits such as child and working tax credits – families with annual income of up to £66,000 currently benefit.

There could also be a tightening of inheritance tax allowances, with exemptions for wealthier estates, to allow a clear difference to be seen between government and certain opposition proposals.

“There may be an increase in the rate of capital gains tax to 25% from next April, though with a lower rate for the disposal of business assets,” Whyte says. “The difference between income and capital gains tax rates is significant and is already starting to influence taxpayer behaviour, as individuals seek capital gains rather than income returns.”

Substantial rises in environmental taxes are a possibility, targeting goods and services creating high emissions including cars. “Naturally, with the general election in mind, any consultation document on such issues is not likely to be specific and leave the tough decisions until the new parliament,” Whyte says.

The BDO tax team predicts that the chancellor will use the last Pre-Budget Report before the election to increase the yield from income tax, national insurance, VAT and customs duties, which are the biggest revenue generators for the government – but they will all be deferred to take effect after the election.

Personal tax reliefs for those on the 50% tax rate, or even the 40% higher rate, could be crimped, while contribution rates or upper earnings ceiling on National Insurance could be raised further.

Grant Thornton says that because the retail price index failed to rise in the year to September, there might be no increase in the income tax personal allowance for 2010-11. It suggests a possible increase in the personal allowance threshold to help those on the minimum wage and other low-income earners. It also proposes an increase in the stamp duty land tax threshold to £200,000 and tax relief on mortgage payments for first-time buyers.

Ronnie Ludwig, tax expert at Saffery Champness, says the Chancellor should reinstate tax relief for pension contributions for the highest earners, due to be restricted next year. “The new rules that effectively increase their taxes further just because they wish to save for their retirement are simply unfair. The termination of the ‘quid pro quo’ of full tax relief on money going into a pension in exchange for full taxation of an annuity coming out amounts to double taxation, and should be reversed before it takes full effect.”

He urges a suspension of the planned increases in national insurance contributions to help the frail economy, a continuation of the stamp duty holiday on properties under £175,000 – due to disappear at the end of the year – and a “stick with the programme” approach to the resumption of a 17.5% rate for VAT in

the new year, rather than further rises.

However Malcolm Cuthbert, head of financial planning at Killik & Co, warns that if the Chancellor wants to start chipping at the public debt mountain, VAT could be raised in stages to 20% over two years, CGT could be lifted to 40%, National Insurance contribution rates could rise from 12.8% to 14%, and pension tax relief could be reduced for 50% or even for 40% taxpayers.

Edinburgh-based planners Turcan Connell speculate on anti-avoidance measures for those trying to mitigate the new 50% tax rate from next April, a reduction in the starting point for the 50% income tax rate to earnings of £100,000, a further increase in the income tax rate for higher earners (to 60%), a 0.5% wealth tax, changes to the rules governing ‘potentially exempt transfers’ for inheritance tax, and capital gains tax up to 25% or 30%.

Steve Folkard, head of pensions and savings strategy at Axa Life, warns: “The Chancellor must balance and understand cause and effect when it comes to taxation, and must not make rash decisions. Tax benefits are expenditure but they also encourage behaviour and, if it is a behaviour that is good for the economy, then the benefits must be considered.”