After the past few years of relatively unsurprising Budgets, with the majority of measures having been announced in advance, this year the Chancellor was able to throw in a few surprises, mainly for the benefit of the taxpayer. Whilst these are undoubtedly welcome, perhaps these “gifts” should come as no surprise with just 14 months to go to the General Election!
There was positive news about the growth of the economy the revision upwards from 2.4% (originally 1.8%) to 2.7%, is the biggest upwards change for 30 years. The Budget deficit has reduced from 11% when the coalition came to power, to 6.6%, with a forecast of a small surplus by 2018/19. This has resulted in savings on interest payments in respect of the national debt of £42bn.
Mr Osborne warned of more tough decisions, which included a continuation of the pay restraints on public sector pay, capping of benefits and making permanent last Autumn Statement’s £1bn spending cuts.
Users of aggressive tax schemes are going to be hard hit by having to pay their potential tax before their enquiry is concluded. This is expected to be challenged and likely to be subject to lively debate before the legislation is finalised, as the measure has retrospective effect for many.
Where residential properties are purchased in companies and trusts the 15% stamp duty rate will be applied from values of £500,000 (currently from £2m of value).
But that is where the bad news ends.
On the positive side £7bn has been put aside to reduce energy costs for manufacturing businesses to increase Britain’s exports and help us “make things again”.
Businesses are also going to benefit from the extension of the Annual Investment Allowance, which provides 100% relief for capital expenditure, from £250,000 to £500,000 per year, until 31 December 2015. It is estimated that 99.8% of capital expenditure will qualify for 100% relief.
Those small businesses that undertake Research and Development will see an increase in the amount they can reclaim, if loss making, from 11% to 14.5%.
For individuals, the personal allowance is to increase from £10,000 to £10,500 in 2015. Many will be toasting the Chancellor’s decision to reduce the price of alcohol duty by 1p per pint, whilst freezing spirits and cider duties, and abolishing the wine escalator. The fuel duty rise forecast for September is to be scrapped.
Then came the real boosts for pensions and savers. The flexibility on pension draw downs is to be radically overhauled, removing the punitive 55% income tax charge and reducing it to the individual’s marginal income tax rate. The requirement to buy an annuity will be scrapped. As this should encourage people to draw more of their pension, whilst it is seemingly a tax giveaway, the measure is actually forecast to generate over £3bn of extra tax for the Government in the next five years.
Savers are finally getting some help. With low interest rates over the past few years, savers have definitely been badly affected. In an attempt to reward those who try to save, a new ISA is to be introduced, which allows a mix of cash and shares, with an annual allowance of £15,000. In respect of saving income the £2,880 10% band is to be abolished and replaced with a £5,000 0% band.
There certainly seems to be more given, than taken away. Is this a sign that the UK is well on its way back to its economic best or is it an attempt to boost the Government’s popularity in advance of the 2015 general election? Either way, in general terms, the Budget seems to mirror the improving weather and perhaps we can all start to look forward to sunnier times. Let’s face it, we’ve waited too long on both fronts!