Commenting on George Osborne’s penultimate budget delivered today, Chris Morgan, head of tax policy at KPMG in the UK, said: “Bingo playing OAPs with healthy bank balances who like a tipple are the big winners in Osborne’s penultimate budget. Business had some good news too although in the main it’s the smaller enterprises that are most likely to benefit.
“The Chancellor said the budget was for ‘makers, doers and savers’. For ‘makers’, ie manufacturers, the export finance measures are a big help. The extension and doubling of the annual investment allowance to £500,000 means the vast majority of businesses will receive full relief for their capital investments."
Measures to reduce energy costs will benefit all businesses, small and large, as will the freezing of fuel duty. For small, loss-making businesses there was extra help with the Research and Development credit payable increasing from 11 percent to 14.5 percent. Increasing support for apprentices should also assist business by helping to close the skills gap.
“For ‘doers’, ie the workers, the help consists of the increase in the personal allowance which, for the first time this parliament, has been allowed to flow through to higher rate taxpayers, contrary to pre-budget predictions. Additionally, freezing fuel duty will also assist.“
"The big winners in today’s budget are the ‘savers’. Tax restrictions on pensioners accessing their pension pots are removed, ISAs become more flexible and the allowance is increased to £15,000 per year, plus the 10 percent ‘savings rate’ of tax is abolished altogether meaning no tax will be paid on the first £5,000 of savings.
“The Chancellor is making some assumptions about people’s behaviour to fund these tax breaks – he is betting that pensioners will take money from their pension funds and that HMRC will win the backlog of avoidance cases."
“Changes to pensions drawdown tax is predicted to raise revenue as of next year on the expectation that more people will withdraw funds from their pots if they are taxed at their normal marginal rate (ie basic, higher or additional rates) rather than the punitive 55 percent rate that was previously levied. Additionally, the Chancellor is assuming that a significant amount will be paid for by forcing taxpayers perceived to have entered tax avoidance schemes to pay any disputed tax ‘up front’ and then argue the position afterwards. If they are found to have paid too much, the pledge today was that the tax would be repaid with interest."
“The big unknowns are whether or not these behavioural changes will happen - whether pensioners will change their behaviour as predicted and how much of the upfront tax payments the Treasury have to eventually pay back. If either factors go the wrong way, the Chancellor will find a black hole in his budget.”
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Chancellor’s Budget 2014
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