Comment by Managing Partner Ray Crudgington of Greenwich and Blackheath Solicitors Grant Saw.
This year’s Spring budget was made against a radically different background to 12 months ago, when the Office for Budget Responsibility had downgraded the 2013 growth prediction to just 0.6%. This year, however, the Chancellor was able to announce a growth target of 2.7%, and 2.3% next year, higher than previously forecasted by the Office for Budget Responsibility.
Headlines for individuals included raising the personal allowance for income tax to £10,500 next year and capping of fuel duty.
But much of the focus of George Osborne’s Spring Budget 2014 was on measures aimed at stimulating business in Britain. These included:
- A doubling of the annual investment allowance to £500,000 a year, in a significant move which will cost the Treasury £2billion
- A £7bn package designed to cut energy bills for British manufacturers
- Funding to support 100,000 more apprenticeships for small businesses
- A three-year extension for business rate discounts and enhanced capital allowances in enterprise zones
For pensioners and those coming up to retirement the story was designed to cheer, as was an announcement that duty on alcohol would be held at current rates. For pensioners, there is a relaxation of the rules regarding how a pension pot is converted into income. Now there’s the freedom to drawdown a pension pot at retirement, with complete freedom as to how it is invested, instead of being forced to buy an annuity. There was also the announcement of a new pensioners’ bond savings scheme from January to all people over 65, paying interest rates of 2.8% for one-year bonds and 4% for three-year bonds.
And for all savers, there’s a simplification on ISAs, enabling stocks & shares and cash ISAs to be merged into one pot, with an increased annual savings limit of £15,000.
Turning his eye to tax avoidance and loopholes in the corporate world, the Chancellor announced that HM Revenue and Customs would be given more power to collect outstanding tax debts and he also dramatically reduced the level at which 15% stamp duty is levied on residential property purchased through a company, often called a corporate envelope. With effect from midnight on Budget Day, the 15% rate became payable on all properties from £500,000 upwards; the starting point was previously £2million. The scope of the annual tax on residential property owned by companies (ATED) has also been increased, pulling properties worth £500,000 into the regime within a couple of years. It’s the closest the Government has yet got to a “mansion tax”.
Also announced was an extension of the Help to Buy scheme that is intended to help people to get on the home-ownership ladder and stimulate the construction industry.
This is not legal advice; it is intended to provide information of general interest about current legal issues.