- VAT to go up to 20pc from 17.5pc
- Capital gains tax for higher-rate taxpayers rises to 28pc
- Child benefit to be frozen for next three years
- Two-year pay freeze for public sector workers
- Basic state pension linked to earnings once again, from April next year
- No new tax increase on alcohol, tobacco or fuel
Taxes
Food, children’s clothing and other VAT-free items remain exempt from VAT for current Parliament
Capital gains tax (CGT) to rise for higher-rate taxpayers to 28pc from midnight
Capital gains tax to remain at 18pc for basic-rate taxpayers
CGT exempt amount remains at £10,100 this year
Personal income tax allowance increased by £1,000 in April to £7,475
Higher rate income tax rate remains frozen to 2013/14
National Insurance threshold rises by £21 next year
The Government will accelerate the increase in state pension age to 66
Business
- Corporation tax cut to 27pc next year
- Corporation tax cut by 1pc point a year for next three years to 24pc
- Small companies tax rate cut to 20pc
- Tax relief for video games industry scrapped, read more here
- UK bank and building society levy from 2011
- Levy also on UK operations of foreign banks
- Smaller banks not liable for a levy
- Banks levy expected to raise more than £2bn a year
- 10pc CGT rate for entrepreneurs extended to first £5m of qualifying gains
Reaction from business leaders on today’s budget
Tony Heywood, CEO of Yoodoo.biz commented:
The national insurance exemption for new start-ups will be hugely welcomed by entrepreneurs, as SMEs will form the backbone of Britain’s economic recovery and deserve to be given a break.
“However, Osbourne’s five year business taxation plan and cuts to corporation tax will make a negligible difference to the number of new start-ups in the coming years. People don’t go into business because of tax incentives; they set up shop because they have great and inspiring
ideas.
“To truly encourage new entrepreneurs, many of them victims of the recession and unemployment, we need to offer training, sound advice and inspiration to help turn their ideas into bankable businesses. Long term employment is only going to be achieved by providing an environment in which would-be entrepreneurs can flourish. It’s the grass-roots reforms to DirectGov and BusinessLink that Vince Cable will oversee at BIS that will make the real difference in encouraging kitchen table entrepreneurs.”
Bobby Lane, leading advisor to SMEs and partner at accountancy firm Shelley Stock Hutter LLP,said:
“In some ways this budget recognised the need to support the entrepreneurial flair of UK’s start-ups and SMEs. This Budget also heralds positive changes for entrepreneurs such as the increase in Entrepreneurs’ relief from £2m to £5m. However, we should remember that up until a few years ago this was unlimited. The reduction in corporation tax will go some way to help the 5million SMEs in the country. This means smaller businesses get an extra 1% of profits this will not help those starting up or already struggling. The increase in the personal allowance means staff can earn an extra £1,000 tax free.
“However many start-ups, particularly those in London and the South East of England will be left out in the cold. Yes, the National Insurance holiday will be of tremendous support to many regional start-ups and SMEs, but why was this not fully inclusive for all businesses in Britain? Whilst the extension of the EFG scheme is good news, the bank levy will do little to encourage banks to lend to small businesses. The 20% VAT rate from next January will also mean the many small businesses unable to reclaim VAT will face higher costs. The reduction in rates of capital allowances and the severe drop in the annual investment allowance will also hurt. Let’s hope the Chancellor and his team at the Treasury start to think of more ways to help inject new life for our start-ups and help SMEs back on the road to recovery.”
Richard Mannion of Smith & Williamson, the accountancy and financial services group said: “Simplicity, competitiveness and fairness are the watchwords here; the new rules appear to underline the fact that CGT isn’t a big money spinner. CGT is part of a defensive shield to protect the tax base.
It’s unprecedented to have a change mid-way through the tax year. This will complicate the tax return for 2010/11 as it will mean pre and post budget day gains will need to be reported separately. As a result, many investors are going to find these rules hard to apply. However, it is good news that the threshold of £10,100 has not been reduced which will be particular helpful to the country’s moderate savers.
Increasing CGT to 28% for higher rate taxpayers will encourage the transfer of assets to spouses paying basic rate tax before they are disposed of.”
