We've been blogging on Reuters Live - and it can be read here. Thanks to Darron Preston for joining us with some excellent acerbic comments! Overall, and primarily as expected, the budget rather sat on the fence with the 'big decisions'. But for investors there was some good news in that the headline Capital Gains Tax rate has stayed still at 18% and that indexation has started for the annual ISA allowance. How long CGT can remain at this level remains to be seen, and surely it's a target after the election.
The Entrepeneurs relief threshold in the CGT rate doubled to £2m and small and Medium sized businesses benefited from cuts in business rates, increases in the investment allowance and commitments from the governement that RBS & Lloyds will lend half of a £94bn pot to SMEs. Having said that, this has to be counterbalanced by the impact on small businesses of the previously announced tax increases such as National Insurance (a topic which Cameron picked up on in his reply).
The deficit continues to balloon though, in spite of the spin that borrowing this year is 'less than forecast' at £167bn. One does wonder when the tough measures to tackle it will be introduced - all the window dressing won't fix the truth of the matter that we are in for years of tax hikes. The pre budget report highlighted the increases to National Insurance Contributions and the 50% rate for high earners, but of course there are hidden 'stealth tax increases' by freezing the tax thresholds. Lots of tactical "it could have been a lot worse but for us" political positioning from Labour and lots of good "it's all your fault" posturing from Cameron afterwards. I think this election is going to be a good scrap!
Some Budget Highlights
- GDP forecast reduced to 3-3.5% for 2011, and confirmed at 1-1.5% for this year. Borrowing this year should now be £11bn lower than forecast at £167bn. Global coordination to drive recovery - confirms support for international bank levy. £16bn claimed for coming asset sales including Tote, Dartford Crossing and Student Loan book.
- Good news for savers… Indexation has begun for ISA limits… our users will be very happy about that!
- £2bn Small Business growth package paid for by Bankers Bonuses Tax. Business rates to be cut for 1 year from October. No CGT rise from 18%. Capital Gains tax entrepreneurs relief threshold raised to £2m from £1m. Annual investment allowance doubled to 100k for small business. RBS/LLoyds to provide £94bn in lending - half of which to SMEs in next year.
- Cider under attack - duty increased by 10% above inflation. Alcohol 2% above inflation. Tobacco 1% above inflation.
- Property: Stamp duty super tax on £1m + homes - 5%. Doubled the stamp duty limit for First Time Buyer (for 2 years), scrapped on properties worth up to £250,000.
- Tax Evasion: Tax information exchange agreements with 3 additional countries. Dominica, Grenada, Belize. £500m to be raised. Signed 'within a few days'. Cue heckle re. Ashcroft.
- Other: Everyone to have a basic bank account - up to 1million more people over 5 years & £2bn fund to invest in Green Energy projects - wind farms etc (2/3 cost of new nuclear power station). No-one over 75 will pay tax on first £10k of pension.
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9 Comments on this Article show/hide all
Cheers Ed - glad to help (couldnt resist the jibes).
Well, exactly as expected. A party political election campaign.
Unforutnately the voting is now so jerrymandered by the massed ranks of public servants and benefit dependent that this is probably enough to win it for them.
Most disapointing is the lack of any moves to reduce red tape via tax simplification (NI rolled into Income tax) or reducing corproation tax rates to encourage companies to stay in the Uk as opposed to leaving for sunnier climes.
Of course no one will point out the raft of pre announced tax rises hiding like a gone off Easter Egg for the new tax year......
Off to the pub now. Some Cider for me, for I am a Cider drinker - cue the music.......
Thoroughly entertaining to read both your comments after the event! Any further info on how indexation of ISA allowances will work, and from when?
SM
A review of the complete Budget document doesn't yield much additional info.
http://www.hm-treasury.gov.uk/d/budget2010_complete.pdf
(P.63) Alongside the substantial support provided, the Government is setting policy to create the right economic environment to promote stability and growth in the medium term. Key actions include:
So no clues really as yet, but let's assume a 2% increase per year, and the allowance will rise approx £200 per year (rounded down), from £10,200 in tax-year 2010/11 to £10,400 in 2011/12, and so on.
I bet ISA Managers will be thrilled by this annual increase, brought in just as the coding-in of the £10,200 allowance for all eligible investors has been completed !
HMRC tend to be quick out of the blocks with their reaction to ISA changes in the Budget so will wait for their bulletin.
In reply to djpreston, post #1
Am a cider drinker too. Not impressed with the massive hike in duty on this specific beverage.
If they have such an issue with underage drinking (which is apparently what these gigantic above inflation increases targetting specific tipples are for) why not just increase the drinking age, and punish those who dont comply.
Why do the rest of us have to suffer financially.
Is it worth the hassle for the investment industry to continually adjust the ISA allowance?
http://www.hm-treasury.gov.uk/d/budget2010_pressnotices_complete.pdf
Each round of adjustments to the investment administration system behind the ISA will either be passed on to the investor, or, less-likely, absorbed by the ISA Manager. It may even see some ISA Managers sticking with the £10,200 allowance (if permitted by HMRC), or withdrawing from the industry altogether and removing choice.
This is a piece of electioneering by Darling ahead of the anticipated May election, but the problems to sort out this mess will be pushed into the next parliament, to be worried about another day.
In reply to Fangorn, post #4
"Why do the rest of us have to suffer financially"
'Cause they want your money, of course. Drink up please!
fuiseog (not cider drinker)
Aaand relax, cider drinkers. The 10% tax rise on cider has been dropped as there is not enough time to process the change in law before the government dissolves on 12 April.
A broadband tax and an electoral reform referendum also miss the boat.
http://news.bbc.co.uk/1/hi/uk_politics/election_2010/8606373.stm
Phew thank goodness for that! :)