Key measures of interest to everyone
- Although widely billed to be a political knock-around,
in truth the 2010 Budget was as much about delivering a
message to the financial markets -that there is a steady hand
on the tiller.
- The forecast for public sector net borrowing for the
current year has been reduced by £11bn (from £178bn at the
PBR to £167bn). This brings the UK's net debt to 54% of GDP,
which is actually better than France, Germany or the US.
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The Chancellor also
forecasts that the deficit will be more than halved over the
next four years, flowing from a combination of tax increases
(predominantly from highly paid individuals) and efficiency
- In absolute terms, the Budget measures are dwarfed by
those announced in the PBR (the PBR forecast to raise £8.5bn
over three years, compared to the Budget's giveaway of £560m
over the same period). Modest tax increases will fund
equally modest giveaways.
- The key announcement was a one-off £2.5bn package
designed to promote small businesses, made up of a large
number of measures which together amount to a welcome
warming of the environment for entrepreneurs (unhelpfully it
looks very much like each measure will have its own
definition of "small"), including:
- The "Time To Pay" scheme has been phenomenally
successful as a recession-beating measure. £5bn of tax
is currently being deferred by 160,000 businesses
employing 1.4 million people. It will be extended for
the whole of the next parliament.
- Business rates are the third biggest cost for small
businesses (after salaries and rents, if you're
interested); rates are being cut for one year from October
2010 and 345,000 businesses will not pay rates at all.
- The 100% deduction for capital expenditure
is doubling to £100k.
- Entrepreneurs selling their businesses will benefit
from a doubling in the limit for the 10% capital gains
tax rate (from £1m to £2m). There will also be no
increase to main capital gains tax rate of 18%.
The key measures for corporates
- Great news for computer gaming, a really important
industry in which the UK leads the world. Canada introduced
tax breaks for computer gaming in the hope of enticing
activity, and it is great to see that the UK will be creating
its own reliefs.
- Still no substantive update on the patent box, despite
wide speculation that a wider consultation would be
forthcoming. However, it got a specific plug in the
Chancellor's speech so is still clearly flavour of the
- There do not seem to be new anti-avoidance measures for corporates over and above those previously announced.
The key measures for VAT and Indirect
- There are a number of small measures, but nothing of any
obvious wide consequence.
The key measures for individuals
- The main disappointment for individuals is that all of
the measures announced in the PBR continue to stand:
- Income tax will increase to 50% for those earning
more than £150k from April 2010
- 1p increase in NIC from April 2011
- Higher rate relief for pension contributions will kick
in from April 2011 and the widely criticised
anti-forestalling legislation is, of course, already in
place. Interestingly, the Impact Assessment states that 50%
of people facing restrictions live in London and the South
East, 55% work in financial services, and 90% are male.
- Growth shares are an increasingly popular way of
rewarding employees. They basically involve shares whose
value are low at the outset and whose subsequent increase in
value is subject to CGT at 18% rather than income tax. There
will be consultation in summer 2010 over their future.
- However, first time buyers will be pleased that stamp
duty has been abolished for two years for house purchases of
up to £250k. This will be funded by a new 5% stamp duty rate
for property purchases worth more than £1m.
- New legislation is to be included in Finance Bill 2010
concerning transactions in securities for individuals, and
will apply to tax 'advantages' arising on or after Budget
day. The new legislation will continue to counter the income
tax advantage arising from certain transactions, but is to
be limited to transactions involving close companies. All
the same, it is surprising to see that the anti-avoidance
will raise £170m in the current year, given the consultation
on transactions in securities was badged as simplification.