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The Next Generation Budget!Well, my predictions of a quiet budget went somewhat awry when the Chancellor stood up this year and firmly planted a budget for the next generation. There was, as always, a long run of numbers and statics that suggested that the Chancellor’s deficit reduction plan was still on target as long as the government undertake a further review of public sector spending and make further cuts, which will be unwelcome news to say the least.There was much talk before the budget about changes to the way those under 40 save for their retirement and the Chancellor answered this by bringing in plans for a lifetime ISA for those under them, which will give savers a bonus from the government every year they make a deposit. This flexible account will enable the saver to withdraw funds from the ISA to buy their first home and then access the remaining funds from age 60. He did seem to suggest that the account would only receive the bonus until they hit age 50 and so after that they’ll be on their own. He did, as many expected, increase the personal allowance to £11,500, which will take more people out of the tax net and makes another stride towards his £12,500 goal. He also included a larger than expected increase in the higher rate threshold to £45,000, both from April 2017, which will help those pushing up against the 40% tax rate and again makes strides towards his £50,000 higher rate goal. He made a surprise further reduction to the rate of corporation tax bringing the rate down another one percent to 17% from April 2020. For small high street businesses he finally clarified the Business Rates position so that for those with rateable values below £15,000 there will be no rates payable. He also brought the Stamp Duty Land Tax on commercial property in line with residential property, albeit with new bands and rates, although those in Scotland have had this type of progressive tax for sometime. It will be interesting to see if this is enough to ‘light the fire of enterprise’. The Insurance Premium Tax increase was much more modest than expected, the extra funds going to flood defences, which is great news as someone who was flooded out of their home in December. It was also great news for my local area with two main roads, the A66 and A69, receiving funds to upgrade them, which is long overdue. The Chancellor brought down the rate of Capital Gains Tax, which was yet another surprise given it wasn’t that long ago that he said the rate of 28% was the correct rate, which people didn’t plan around. He has decided to slice this back to 20% and so it will be interesting to see what impact this has on tax receipts. There is no doubt that the main announcement is the lifetime ISA, which as a flexible fund will bring a degree of freedom, the like of which we haven’t seen before, on how they use their savings, and with the changes to Sugar tax means that he is not only looking after their wealth but also their health. |
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Graham Poles, Head of Tax, |
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