Firstly, we had good news in the fact that the economy is recovering at a faster rate than was previously expected. Yes, it is still in recovery but there is room for optimism here it seems. The UK is growing at a faster rate than other economies including Germany, Japan and the US. Hooray! Of course if the economies surrounding the UK, particularly the Eurozone, are recovering at a slower pace then high commodity prices will make the UK’s outlook sensibly cautious at best.
Then came the expected announcement that the £1 coin will be replaced in three years’ time with a more technologically advanced version to reduce its vulnerability to forgery. It will be cutting edge science blended with historical inspiration to keep it current and yet nostalgic. I wonder if vending and car park machines will need to be altered or has someone thought about that? I have a suggestion – reduce parking costs to 50p a pop! My budget speech would be far more news worthy!
Now we are into the serious stuff, although it has to be said there wasn’t a lot of it! HMRC are to be given even greater powers to collect debt from the bank accounts of those who can afford tax but refuse to pay it. Transferring profits between companies within groups to avoid tax will be banned.
The misuse of enterprise investment schemes and venture capital trusts will also be prevented from happening. There is an awful lot of monitoring going to have to take place to enforce all of the above. Has the number of civil servants doubled in size or are folk just going to become more honest with the dawn of the new tax year?
Corporation tax will fall to 21% in a few weeks and will drop to 20% next year. The business rate discounts and enhanced capital allowances for enterprise zones will be extended for another three years. High street stores will receive £1,000 off their rates and there will be an Employment Allowance for every business in the country which will provide £2,000 cash back on jobs.
The Annual Investment Allowance will be doubled in April – making it £500,000 and this will run until the end of 2015. That will enable 99.8% of businesses to qualify for a 100% investment allowance.
The expected rise to £10,500 of personal tax allowance has been honoured. This will come in effect next year and from April 6 2014 it will climb to £10,000. The higher rate threshold is also rising from £41,450 to £41,865 in April and will reach £42,285 next year.
It seems like the right decisions have been made for keeping manufacturing jobs in the UK which is what counts right now. The £7 billion package introduced to cut energy bills for British manufacturers will reduce production costs and even the playing field. It includes a cap on the Carbon Price Support rate at £18 per tonne for Co2 from 2016-17 until 2020. The current compensation scheme for energy intensive industries will also be extended for another four years to 2019-20. Manufacturing lives to fight another day in the UK!
No rise on fuel duty. Thank goodness! It is costly enough as it stands thank you very much. Bingo duty will also be halved to 10%. However, duty on fixed-odds betting terminals rises by 25%. Tabacco duty has also risen by 2% – no surprises there. Beer duty will fall by 1p so the pint is safe (don’t think that is the only measure needed to save local pubs though) and duty is frozen on Scottish Whiskey and cider. We now know what to drink if inclined to toast the budget speech!
I was a little lost when watching Osborne glide through what sounded like massive reform to the pension system. This is how it pans out. The guaranteed income requirement for flexible pension drawdown will be cut from £20,000 to £12,000, while the capped drawdown limit will be raised to 150% from 120% of the GAD rate. The size of qualifying small pension pot will be increased to £10,000 and the total pension savings that can be converted into a cash lump sum will be almost doubled to £30,000.
The reform comes in the way that pensions are withdrawn. Osborne has handed the powers back to pensioner’s to control their own finances. He plans to remove all tax restrictions on how pension pots are accessed and stresses that they will be offered free, impartial advice on how to best convert defined contributions into a retirement income. The message is that it is their money so they should be able to use it and manage it as they see fit.
Premium bonds cap on contributions will raise from £30,000 to £40,000 this June and this will increase to £50,000 next year. Great I had no idea where I was going to put that £10,000 I had stuffed under the mattress!
There will be up to 10 million new, taxable Pensioner Bonds that offer expected rates of 2.8% for a one year bond and 4% for a three year bond. Up to £10,000 can be invested in each bond.
The annual ISAs allowance will be increased to £15,000 with Junior ISA limits being increased to £4,000. This is great news for savers – if only we all had something to save!
So, that was the budget – at least the main areas. Nothing overly offensive or surprising but I am sure Labour and the Conservatives will thrash out all the arguments they can about each insignificant point. At the end of the day, we are happy enough with the budget speech, just a little bit less childish disruption in the House of Commons and more straight talking decision making would be appreciated. They all manipulate the English language quite well to try and disguise something bad as something good so we remain informed but ultimately weary of what lies ahead!