The growth forecast issued by the Office for Budget Responsibility was 0.6% in March, for the current year. This has now been increased to 1.4%. Meanwhile, the percentage of debt to Gross Domestic Product has dropped from 7.5% in March, to 6.8%. This is down from 11% when the current Government came into power.
Spending cuts will continue and there is no intention to significantly increase public spending any time soon. There was, however, a positive announcement that all infant school children will be entitled to free school meals from September 2014.
But what about tax announcements? There were a few and, perhaps unsurprisingly, not all positive but many of them do not come into force for a number of years yet.
So let’s start with the positive news. For small businesses, the business rates relief, which was due to end in April 2014, has been extended by one year. Also any rate increases from April 2015 will be capped at 2% per annum. Further help for all business comes in the form of an exemption from April 2015 for employer national insurance contributions on all employees under the age of 21 who are earning less than £813 a week.
For individuals, the personal allowance was confirmed as rising to £10,000 in April 2014. In addition a new, transferrable, married couples allowance of £1,000, will be introduced for basic rate taxpayers in April 2015. This will automatically rise in line with any personal allowance increases.
Fuel duty is to be frozen next year, meaning that the price of a litre of fuel will be 20p cheaper than if the previous Government’s fuel escalator had continued to apply.
As has become a regular announcement, more anti avoidance legislation is to be introduced. This will target individuals using companies to avoid an employer/employee relationship being created as well as insist that up front tax payments be made where a particular avoidance scheme has failed in the courts. The detail will need to be reviewed as to how, in particular the former of these two measures, is going to impact on individuals and businesses alike.
The biggest hits on the taxpayer came in respect of capital gains tax. Firstly, as was expected, non residents will be required to pay capital gains tax on any property held by them in the UK. This will apply from April 2015. There was more of a shock in respect of private residence exemption, which has remained untouched for years. Under current legislation, if the property has been your private residence at some point, the last three years of ownership is automatically exempt, regardless of whether it was your private residence at the time of sale. This is to be halved to 18 months from April 2014 and is expected to raise an additional £360m for the Government’s coffers by April 2019.
With just 18 months before the next election, the Chancellor must be quite happy with the message he’s been able to deliver although, as he pointed out, we’ve still got quite a way to go. Hopefully the recovery will continue and George Osborne will be able to dust off his Santa suit next spring to give everyone some Budget gifts.