| | George slays the petrol dragon
It was always on the cards wasn’t it? With oil prices rising almost daily and the cost of filling your tank of petrol increasing by about 40% over the last few months it was almost inevitable that the Chancellor would offer some relief when he stood up today. And so it proved. Rather than the potential 4p per litre increase that was planned, George Osborne has cut fuel duty by 1p from 6pm that same evening.
Good news for motorists, but was everything else quite so positive?
The negatives first. Growth has been forecast at 1.7% for this year, down from 2.1%. This was expected and, depending on who you believe, is either as a result of the snow we had at the end of last year, or a mis-management of the public purse!
Having already announced most of the bad news, this Budget had a softer edge to it, targeting those that have had the most negative press coverage. Any guesses?
It’s perhaps not difficult to work out that banks are to be hit again, with an increase in the bank levy. North Sea Oil companies have also been targeted to finance the give away on the fuel duty, whilst tax avoiders have also been singled out. However, the longer the 50% rate stays in place, the more appetite there will be to avoid tax, so the battle will no doubt continue.
Onto the good news. The main rate of corporation tax is to decrease by 2%, rather than the 1% originally anticipated, with further 1% reductions for the next three years. This brings the rate down to 26% from 1 April, reducing to 23% by 2014, making it the lowest rate amongst the G7 countries.
To further assist business owners, the Entrepreneurs’ Relief limit has, for the third successive Budget, been increased, this time to £10m from the previous £5m lifetime limit.
There was a surprising boost for smaller businesses engaging in Research and Development (R&D) activities, with an increase in the tax credit available from 175% to 200% from 1 April 2011 and to 225% from 1 April 2012. This is becoming an increasingly valuable relief and many businesses engage in R&D unknowingly. It is going to become more and more important to understand where the relief applies.
But, as with every Budget, there is always something that sneaks through mostly unnoticed. It was previously announced that there was to be a change in the way tax credits, public sector pensions and benefits would increase year on year, from being based on the Retail Price Index (RPI) to the less generous Consumer Price Index (CPI). The Chancellor announced that direct tax bands would follow the same pattern. According to the government’s own numbers, these two measures will bring in an extra £11.5 billion per year by 2015/16. Who is paying that? We all are.
So, whilst the petrol dragon may have been slain (or at least injured a little), there appears to be a much bigger monster waiting in the wings.