George Osborne had probably expected that in same way as Gordon Brown had supported Tony Blair in his election as Party Leader and then succeeded him as Prime Minister, that he George Osborne would follow David Cameron as Prime Minister. Life does not always go as we planned and unlike Gordon Brown, George Osborne has a number of viable contenders to succeed David Cameron when he steps down, as promised, prior to the end of this Parliament.
With those competitors gaining prominent publicity in recent months the pressure was on George to deliver a budget to elevate himself back into the role of No 1 contender and I have to say, by George he has only gone and done it.
George Osborne spent 65 minutes at the Despatch Box replete with a number of one liners together with a number of lines which were he repeated regularly, including his two favourites “we act now so that we do not have to pay later” and “this budget puts the next generation first”.
In a business sense this was very much a “Robin Hood” budget with the victims being the large multi-nationals and the beneficiaries being small businesses with the aim of raising billions of pounds from the larger multi-internationals to redistribute them back to smaller UK companies.
Amongst the measures that will be particularly welcome to our clients are:-
• A medium term commitment to reducing the rate of corporation tax to 17% in 2020/2021.
• A significant increase in business rates relief for smaller businesses by an increase in the thresholds as to the size of premises that fall within the relief.
• A reduction in capital gains tax rates from 18/28% to 10/20% (although in line with his recent theme of bashing landlords the old rates still apply to residential properties that do not quality for principle private residence relief).
• Extension to the rules for entrepreneurs relief including a new category for non employee shareholders with a three year qualifying holding period.
• A reform of the commercial property stamp duty system in line with that of the residential property system introduced in previous budgets.
• The abolishing of class 2 NIC.
One downside that may affect some of our clients is that the section 455 temporary tax which applies to loans to participators has been increased from 25% to 32.5% for new loans from the 5 April 2016. However, this was to be expected as the previous rate was aligned to the basic rate of tax on dividends and as he has introduced a 7.5% charge on dividends one would have expected this to follow, which has now happened.
With regard to personal taxation the Chancellor has continued towards his commitment of increasing both the “nil” rate band and the basic rate threshold and again he has reiterated his commitment to see this at £12,500 and £50,000 respectively by the end of the Parliament. The interesting thing to point out here is that when one takes into account all these measures i.e. the lower corporation tax, and the increase in thresholds and then takes into account the new taxes on dividends that he has introduced, by the end of this Parliament the amount of tax that many of our clients will be paying, will be similar to that at the end of the previous Parliament just called different things.
The Chancellor has resisted the urge to make any further changes on pensions legislation and this bought about the biggest laugh of the afternoon when he said in Parliament “that the Liberal Democrats had said he would abolish the tax free lump sum and he has decided to keep the tax free lump sum but to abolish Liberal Democrats instead”. In a sign of things to come he has introduced a new lifetime ISA which he quite clearly said follows the North American model. It is clear that over time he will be encouraging people to save through this vehicle rather than through a pension.
For those of us with long enough memories we will recall that one of the main events of the budget was the Chancellor putting up the taxes on cigarettes and alcohol. With the availability of “booze cruises” and people buying alcohol in bulk from Europe and bringing it back to the UK, the Chancellor has in recent years refrained from major increases in alcohol duty. This year he announced the introduction of a new tax to be applied to sugary drinks and one wonders whether in future years rather than taking “booze cruises” across to Europe our children will be taking “fizzy drinks cruises”.