So what did you all expect?!?!
Personally I turned on the radio today not expecting to hear a great deal of substance, if for no other reason than the emergency budget last year did set the future tax course and Octobers spending review set the expectations on public expenditure. In addition with the events that have taken place around the world in recent weeks and the downturn in expected growth for 2011, there has to be very little in the public purse to make any significant changes.
I did however have hopes that although there could be little immediate action we would receive some indication of:
- Plans on how they would incentivise business owners and entrepreneurs to make investment in their business and stimulate the economy.
- When the 50% income tax rate would be reduced (I personally believe that this rate of income tax creates more damage to the UK economy than the revenue it generates).
- Simplification of the tax system.
In summary with this back drop in mind my own initial view of the budget today is that it did contain a number of surprises that did address the points above including a further reduction in the main rate of corporation tax and the increase in Entrepreneurs Relief. However the concern remains that in uncertain economic conditions, as demonstrated by the revised expectations for growth, is there enough incentive for the private sector to invest and grow to cover the decline in public spending (be these much needed cuts).
We will now consider the press releases and consultation documents that have been issued this afternoon, to see what the detail contains, however in case you have not yet been able to catch the main announcements coming out of the Budget report we thought we would summarise them for you.
Economic and Spending Announcements
- The Chancellor stated that the Budget is fiscally neutral.
- The Chancellor expects UK GDP to grow by 1.7% this year (2011), 2.5% next year, 2.9%,2.9% and 2.8% in 2013, 2014 and 2015.
- Cost of military action in Libya will be met by the treasury reserve and will not result in increased taxes.
- The inflation target set for the Bank of England is unchanged at 2%, although inflation is expected to remain between 4% and 5% this year, 2.5% in 2013 and 2% in 2014.
- Public borrowing will be £146bn this year but decreasing to £29bn in 2015/2016.
Taxation Announcements
- The Budget abolishes 43 complex tax reliefs which the Chancellor believes will simplify the tax system and remove over 100 pages of tax legislation. Many of these relate to PAYE and NI issues. Let's hope that none of these reliefs are valuable ones ... watch this space.
- Consultation on the merging of NI and Income Tax, however it is believed this will take a number of years to consult upon and instigate.
- The main rate of Corporation Tax to be cut from April 2011 by a further 1% from 27% to 26% and then by a further 1% per year until the main rate reaches 23%. The small companies rate is unchanged but remember that there is already a reduction from 21% to 20% applying from April 2011.
- Capital Gains Tax Entrepreneurs Relief, providing an effective 10% tax rate, to be increased such that £10 million, previously £5 million, of qualifying gains will be taxed at the reduced rate.
- Non domicile tax charge to increase from £30,000 to £50,000.
- 50% Income Tax still viewed as a 'temporary tax'. The Chancellor does not say when it will go but he has asked HM Revenue and Customs to find out how much money it really raises.
- Twenty one new Enterprise Zones to be formed and business will receive significant tax incentives if operating in those locations. The nearest zone to the South Coast is to be in Bristol.
- Small companies who are eligible to claim the R&D tax credit are to see the relief double.
- Reforms to be made to simplify gift aid for charities and enable cash donations collected in 'tins' to qualify for gift aid.
- Inheritance tax to be amended such that if you give 10% or more to charity in your estate your inheritance tax bill will be reduced by 10%.
- Stamp Duty Land Tax avoidance to be tackled.
- Additional tax avoidance measures, including those to mitigate the use of EBTs and EFURBs will save £1bn this year; £4bn over the course of the Parliament.
- The Income Tax personal allowance to be increased to £8,105 from April 2012.
- Mileage rate for the first 10,000 miles of business travel to increase from 40p to 45p.
- No changes to rates of alcohol duty and therefore the previously announced increases will still apply.
- Tobacco duty to increase by 2p above inflation.
- Planned fuel duty increase of 1pc above inflation to be delayed and fuel escalator will be ditched when oil prices are high. Fuel duty will be lower by 1p from 6pm tonight.
- The rate of relief that is to apply on EIS investments is to increase from 20% to 30% from April 2011.
Other Announcements and Measures to be Introduced
- There will be a three-year moratorium on new regulations for small businesses.
- No new regulation on firms with fewer than 10 staff for three years from each introduction.
- A £250m shared equity scheme to be set up, to help first-time property buyers borrow money for a deposit. The objective is that this will help 10,000 families get onto the housing ladder.
- £100m to be provided for repairing potholes in England (yippee!).
- New planning rules to be introduced that require planners to prioritise growth and jobs.
- The state pension age to be increased regularly, according to a pre-arranged mechanism that is yet to be agreed.
- Funding to be provided for up to 50,000 new apprenticeships for young people out of work and up to 100,000 work experience placements.
- Green investment bank to be set up. It will start in 2012, one year earlier than expected, and it will be funded with £3bn, not £1bn as planned.
So would you like to hear more? If so and you have not already registered to attend then please join me when I will be giving a presentation summarising the budget speech and how it may affect you.
Hope you have found this summary useful and if you want to find out more about these announcements then please call us. |
