Posted by admin - March 19, 2014 6:06 pm Budget 2014 News

Budget Day News – 19th March 2014

In his Budget Speech the Chancellor, George Osborne, announced a boost for businesses, savers and pensioners. He also promised more cuts to parliament with further pay restraints to public sector workers and the introduction of a New Charter for Budget Responsibility this autumn to ensure that never again would costs spiral out of control. A Structural Welfare Cap is also to be set at £119bn in 2015 and thereafter this amount will only change, he said, with the levels of inflation or only with the further permission of Parliament.

The main budget measures were to help Britain to export, build and manufacture more with additional measures helping gain finance for builders and exporters and assistance for manufacturers with high energy costs. Savers were also encouraged with a host of different measures.

The IMF he stated, believes that the UK is “achieving the largest reduction in both the headline and structural deficits of any major advanced economy in the world”. However, with one of the highest deficits in Europe, he said, there was still much to do.

Unemployment levels

The Chancellor reported that UK unemployment level had fallen to 2.3 million and that we were now seeing the largest fall of people claiming unemployment benefits since February 1998.

UK Growth and borrowing

The Chancellor commented that under the Government’s measures that, “Growth was up, the deficit set to halve, debt is lower, but that the biggest single saving of all is a £42bn reduction in the interest payments we will have to make on that debt.”

Revised figures from the Office for Budget Responsibility (OBR) showed UK growth of 2.7% in 2014, up from the forecast reported in the Autumn Statement of 2.4%. Forecasts for the next four years range from 2.3% to 2.6% annually.

The OBR also reported on revised borrowing forecasts over the next 5 years as follows:

2013/14 £108bn, 2014/15 £95bn, 2015/16 75bn, 2016/17 44bn, 2017/18 17bn, 2018/19 £-5bn

The Chancellor also stated that the debt would peak at 78.7% of GDP in 2015/16 and by the end of this year we would see pre-crisis debt levels.

Main highlights

Businesses

  • The Annual Investment Allowance will be increased to £500,000 until the end of 2015.
  • Business rates discounts and enhanced capital allowances will be extended in enterprise zones for another three years.
  • The Seed Enterprise Investment Scheme (SEIS) will be made permanent.
  • A new Corporation Tax relief for theatrical productions and touring theatrical productions is to be introduced.
  • To assist manufacturers with high energy usage the main rates of Climate Change Levy will increase in line with inflation. This change will come into effect from 1 April 2015.
  • Export Finance will be doubled to £3bn to assist Britain to export more.
  • Plans have also been announced for the removal of Employer’s National Insurance costs for under 21’s.

Duties

  • Fuel duty increases previously planned for September have now been scrapped
  • Tobacco duty will once again rise 2% above inflation
  • The Alcohol duty escalator has been scrapped and for the second year running Beer duty will be reduced by a penny a pint. Duty on Spirits and Cider will both be frozen.
  • Air passenger duty will be changed from 2015 from which date, all long haul flights will carry the same, lower, band B tax rate as those to the USA.
  • Fixed odds betting terminals in bookies will now be taxed at a higher rate of 25% and this will be extended to offshore bookmakers.
  • Bingo duty however is set to halve to 10%.
  • From midnight tonight anyone purchasing residential property worth over half a million pounds through a corporate envelope will be required to pay 15% stamp duty.

Individuals

  • Personal tax allowance will rise in 2015 from £10,000 (being introduced in April 2014) to £10,500.
  • The basic rate band will be £31,785 for 2015/16 tax year.
  • The higher rate threshold will rise for the first time since this parliament came into power, from £41,450 to £41,865 next month, and then by a further 1% to £42,285 next year. This will directly benefit higher tax payers with incomes under £100,000.
  • The Help to Buy Scheme has been extended until 2020.
  • Childcare Tax allowance, as previously reported, will now be £2000.

Pensions & Savings

  • A new combined ISA will be introduced in July this year, with an annual limit of £15,000, an increase of 30% on the existing limits.
  • For 2015/16 the 10% savings tax rule will be abolished.
  • A new pensioner bond will be introduced and will be available to anyone aged over 65. Mr Osborne commented that, “The exact rates will be set in the autumn, to ensure the best possible offer – but our assumption is 2.8% for a one year bond and 4% on a three year bond.”
  • Changes are also be made on the rules regarding how people can convert a pension pot into an annual income. Pensioners will now have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.

Business feedback

The CBI has responded to the Budget speech by the Chancellor George Osborne by saying, “The Budget will put wind in the sails of business investment, especially for manufacturers. “This was a make or break budget coming at a critical time in the recovery and the Chancellor has focused his firepower on areas that have the potential to lock in growth”.

Meanwhile, The Federation of Small Businesses commented: “Today’s Budget offered a clear signal for businesses to grow through the increased investment allowance with a focus on manufacturing. The £7bn package to cut manufacturing energy bills will help create jobs and strengthen this key sector.”

Comment on the Budget from Michael Whittaker, Partner, MFW Herne Bay

The Chancellor has taken positive measures to stimulate business investment with a package of tax reliefs to encourage Capital Investment together with the control of energy costs.

He is also encouraging savers with an overhaul of ISA legislation, together with measures for pensioners in the form of both Pensioner Bonds and greater flexibility in the use of their pension funds.

If you would like some advice or further information following this year’s Budget then please do contact your local MFW office

Alternatively download a copy of our full Budget Report below or download a copy of the Treasury’s report click here

MFW Budget Report 2014Download