Financial wizards Aequitas give us their take on the first Conservative-only Budget in nearly 20 years, a budget in which Chancellor George Osborne announced a series of bold measures affecting business, tax and welfare.
Heralding the Second Budget as a ‘big Budget for a country with big ambitions‘, the Chancellor unveiled his announcements with the stated aim of moving from a ‘low wage, high tax, high welfare economy to the higher wage, lower tax, lower welfare country we intend to create’.
Acknowledging the ongoing risks posed by the global economy, the Chancellor reported that the Office for Budget Responsibility had revised down its economic growth forecast to 2.4% for 2015 and announced that a budget surplus will now be reached a year later than planned, in 2019/20.
In a series of moves designed to incentivise UK businesses, the Chancellor announced future reductions in corporation tax to 18%. The Annual Investment Allowance will be set at £200,000 from 1 January 2016, while the Employment Allowance will be increased by 50% to £3,000 from April 2016. Meanwhile, a new apprenticeships levy will be applied to all large firms.
Key announcements on personal taxation include an increase in the basic income tax personal allowance threshold to £11,000 next year, and a rise in the basic rate limit to £32,000. The pensions tax relief annual allowance for the highest earners will be reduced from next year, and a new Green Paper will propose radical changes to the pension saving system.
A new, compulsory National Living Wage will apply for those aged 25 and above from next April, while working parents will receive up to 30 hours a week of free childcare for 3-4 year olds from September 2017.
Changes to the inheritance tax rules will include a new main residence allowance starting at £100,000 and rising to £175,000 by 2021. This could allow families to pass on up to a total of £1m to their children without paying inheritance tax.
Whilst it is good to see the corporation tax rates on the way down and the long awaited inheritance tax changes finally come to fruition, the single most significant impact to many small businesses will be the radical increase in the National Living Wage which will go up to £9/hour from the current £6.50/hour – an increase of nearly 40%. This combined with the pensions autoenrolment being implemented over the next two years is certainly going to hit many small businesses.
I believe the Chancellor has put a lot of the burden of recovery on small businesses through this wage rise and it will be very controversial.
Further measures to clamp down on tax evasion and aggressive tax avoidance are expected to raise an additional £5bn and the Government will abolish permanent non-dom status from April 2017.
Other measures announced include a freeze in fuel duty for the remainder of the year, a planned relaxation of Sunday trading laws for England and Wales, and a new Roads Fund which will be supported by Vehicle Excise Duty.
For a detailed overview of the Budget Report and what it means for you and your business, visit our website and read our full Report summary.
WHAT THEY SAID
This is a one nation Government that does the best thing for the economy and the right thing for the country. This plan is reflected in the forecasts for debt and deficit produced today by the Office for Budget Responsibility.
Chancellor George Osborne
This Budget is less about economic strategy, more about political tactics designed by the Chancellor to help him move in next door.
Harriet Harman, Interim Labour Leader
Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measurement.
John Cridland, Confederation of British Industry
For young people, it was all bad news as they will not get the minimum wage boost and will suffer from cuts to higher education grants and housing benefit. And it was not a one-nation budget for public sector workers who will face years more of cuts to real wages.
Frances O’Grady, TUC
Even though offset by a welcome increase in the Employment Allowance, some will find the new national living wage challenging.
John Allan, Federation of Small Businesses
The Annual Investment Allowance has been fixed for five years, but at far too low a rate of £200,000. This will not help as many small and medium-sized businesses to invest for the future.
Simon Walker, Institute of Directors
For a detailed overview of the Budget Report and what it means for you and your business, visit our website and read our full Report summary.
About Aequitas Chartered Accountants and Registered Auditors
Aequitas are a highly regarded chartered accountancy practice that work with all sizes of owner managed business, through to SMEs and larger corporations. With specific knowledge of the print industry – Aequitas clients range from print service providers to product manufacturers – we can recommend that you get in touch with Aequitas today to find out how they can help your business.
