No, this is not the Chancellor’s tip for Cheltenham Festival, but instead it was the focus of his Budget, something he mentioned a mere sixteen times throughout his speech.
George Osborne was able to make some pretty confident statements, including the fact that the Office for Budget Responsibility is predicting that the UK will be the fastest growing major economy in the world, whilst employment rates are currently the highest in the UK’s history. Add to this the fact that our deficit has reduced by two thirds from when he took over and you can understand why he was in a buoyant mood.
There were a lot of tax announcements made during his 64 minute speech, most of which were a surprise, which makes a change from previous Budgets where the bulk of the detail has been leaked in advance.
One of the biggest surprises was the reduction in the capital gains tax rates, from a main rate of 28% to 20% and on the lower rate from 18% to 10%. Unfortunately, for buy to let investors, the joy was short lived when the Chancellor announced there would be an 8% surcharge for residential property sales.
Corporation tax is to be lowered even further than originally predicted, with a commitment to a 17% rate by 2020.
Inevitably, there was his regular attack on large corporates, tax avoidance and evasion, with a range of measures seeking to bring in an extra £12bn in revenue by the end of the parliament.
Those measures include an increase in the tax charge on loans to shareholders from 25% to 32.5%. For larger companies with profits over £5m the use of brought forward trading losses will be restricted to 50% of the profits of the later year.
Beer, cider and scotch whiskey rates were frozen, as was fuel duty, which was widely tipped to be set for an increase, whilst the attack on smokers continues with a further 2% increase.
In an attempt to reduce the risk of childhood obesity, George is going to introduce a “sugar tax” from April 2018, chargeable on the manufacturers. The measure is expected to bring in £520m and all monies raised will be spent on school sports.
To assist the next generation to save for retirement, a pension ISA is to be available for those aged between 18 and 40, whereby up to £4,000 can be put in per year, which will be matched by 25% of the amount contributed, by the government. Is the start of the end of pensions? The Chancellor did confirm that the lump sum tax free amount will remain, which was a relief to many.
With his monies now firmly on the Next Generation, the hope is that he’s onto a winner, but only time will tell.
For further information, our comments, Budget booklet and tax fact card can be found here.