A lot has happened since the 2011 budget. With a rise in unemployment, a decrease in growth forecasts, inflation hitting a massive 5% and the new crisis going on in the Eurozone. The Chancellor has had a difficult year and therefore his options have been limited given the need to protect the revenue of the UK.
That said there has been a slight improvement in the conditions of the economy since the start of 2012 and steps taken in order to cut the deficit appear to have had a degree of success. So the Chancellor may have a certain degree of optimism since the 2011 Autumn Statement.
The Chancellor’s Key aims from this budget report is to increase the UK’s growth, to rebalance the economy towards manufacturing and exports and to reduce the budget deficit. The main points of interest from the report in order to achieve this are as follows:
Corporation Tax: The Chancellor has set to reduce the main rate of corporation tax to 24% from April 2012; after that it will reduce by 1% annually to be 22% in April 2014.
Tax Avoidance: The main avoidance being targeted by the Government is that of stamp duty land tax with the Chancellor warning property investors that he would be seeking to take action to block schemes that seek to avoid paying the 5% stamp duty land tax on the transfers of property usually by using off shore companies and sub-sale relief. This was supported by the introduction of a 7% stamp duty land tax charge for properties worth more than £2m. Meaning a charge of £140,000 of the sale of a £2m property.
Income Tax Personal Allowance: The Chancellor is keen to appeal to hard working families by increasing the income tax personal allowance to £8,105 for 2012/13 and £9,205 for 2013/14. However, there is a redistribution of these age related allowances for those over 65 will be frozen at 2013/14 levels for those who currently receive them and abolished for those who have yet to receive them. The rates will be frozen until the personal allowance catches up so in the future all tax payers will have the same personal allowance.
50p Additional Tax Rate: Finally the Chancellor announced that the 50p additional tax rate will be reduced to 45% from April 2013. The justification being that HMRC’s study showed that receipts from it were far lower than expected.
The Chancellor has also announced a potential restriction on tax reliefs for the higher earners, for anyone seeking to claim more than £50,000 in tax reliefs they will only be able to claim the higher of £50,000 or 25% of their income.
In conclusion the Budget was aimed to encourage growth: we will have to wait and see if the measures taken will have enough effect to encourage this growth.