Accountant Hugh Williams is author of Lawpack's 101 Ways to Pay Less Tax and founding partner of HM Williams Accountants, winners of the prestigious Butterworth Tolley Best Tax Team Award.
Here he gives his views on the latest Budget.
Today’s Budget is about four main ambitions:
- To create the most competitive tax system in the G20.
- To make the UK the best place in Europe to start, finance and grow a business.
- To encourage exports and investment.
- To create a more educated workforce that is the most flexible in Europe.
The Chancellor plans to reform the nation’s economy, help families and help with the cost of oil.
We are now en route from “Rescue to Reform” and from “Reform to Recovery.”
The government has inherited a record Budget deficit – (as if we don’t know) – but with market rates in Greece at about 12% and with our equivalent rate at 3.6%, we have the same rates as Germany and therefore can now benefit from, once again, enjoying economic stability.
He said that his would not be a Budget Speech where the figures are read out so fast that nobody can keep up! (There can be no denying that Gordon Brown was oh-so-guilty of spreading such confusion in his lightening fast and badly delivered Budget Speeches for eleven years!)
Growth for next year is expected to be 1.7%. While down on his earlier forecast, this is better than that of Spain, Italy and France and will be the same as the average for the Eurozone. The inflation target for next year will be between 4% and 5%.
The government deficit will be down to “only” 29 billion by 2015/16. (Well at least it is set to come down. When can we expect a surplus, please?) And it will be growth in the private sector, as a result of this Budget, that will achieve the improvement.
Manufacturing is, at last, increasing.
Our tax system should be much simpler (hooray!) and fair. The Office of Tax Simplification will abolish 43 complex reliefs like the millennium gift aid relief which will not be needed for another 989 years (!) and 100 pages will be cut from our tax code. Income Tax and National Insurance look like being merged (hooray!)
There were plenty of ideas to stimulate business and also make credit more readily available.
- Planning permission. The planning system will be revised to give priority to growth and green projects.
- The main rate of corporation tax will be reduced by 2% this year (not 1% as previously announced) and it will come down to 23% by 2015, but banks will have their levy increased to ensure they don’t pay less. Our corporate rate will be the lowest rate in the G7.
- The rate relief holiday for small business will now last one further year until October 2012.
- Real Estate Investment Trusts will be simplified and there will be twenty one new enterprise zones.
- Capital Allowances on short life assets will be extended from four years to eight years.
- Vehicle excise duty on lorries will be frozen. The upper (i.e. usual) mileage allowance for employees driving their own cars goes up to 45p per mile.
Personal tax, etc.
- Changes to car tax will help drivers of low carbon emission cars. The green investment bank will start next year (one year earlier than planned)
- State pension age will be raised to 66 by 2020.
- Public service pensions will be reformed.
- There will be £250 million help for first-time house buyers.
- Gift aid will be simplified with a simpler on-line system for claiming.
- Inheritance tax – if you leave 10% or more to charity, the government will reduce your IHT rate by 10%. NB: This will not help beneficiaries, just charities.
- Council tax to be frozen in the coming year.
- Child tax credits will be increased.
- Personal tax allowance will increase to £8,105 from April 2012. It will take one million people out of tax. The 50% band is to be reviewed.
- Air passenger duty is being looked at. It will not go up this year, after all, but it will increase next year.
- Tax on the strongest beers to go up but all other alcohol duties will stay where they were when put into place by the previous government.
- Tobacco duty goes up by 2% above inflation.
- Fuel duty – the fuel duty rise under the Fuel Duty Escalator, which was due to be imposed shortly and planned by the previous government, will be delayed. It seems that the escalator will be cancelled for the rest of this parliament. With oil companies making unexpected profits, now that the oil price is so high, they will pay more tax to compensate – this to be called the Fair Fuel Stabiliser. Fuel duty is being cut by 1p per litre (it’s already in place as you read this!) and this measure enabled the Chancellor to end his speech saying he had put fuel into the nation’s domestic economy.
Tax avoidance, etc.
- Non-doms will pay more but will also be encouraged to invest here more.
- Capital gains tax rules for companies will be tightened and tax-free lifetime loans to employees that are never repaid to be caught.
- Owners of high value property will pay more tax. (This sounds ominous.)
To educate our workforce better
- There will be new university technical colleges.
- In England less than one in ten employers offers apprenticeships and so 40,000 new apprenticeships are being funded today.
The view of HM Williams Accountants
While unable to comment on how well these measures will prove to be, what we can say is that Mr Osborne’s ideas seem very commendable. Apart from threatening to tax high value property more (which sounds like we are going to see some nasty inheritance tax measures soon) all of the rest of these ideas seem very sensible AND, after Nigel Lawson and Dennis Healey, we think that he is the third best deliverer of a Budget Speech. Well done, George!
Get more expert guidance from Hugh on how to save tax and how the Budget will affect you in his tax-busting guides 101 Ways to Pay Less Tax and Tax Answers at a Glance. Both books are being updated as we speak and will be published on 29th April outlining all the latest Budget changes.
Published on: March 23, 2011
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