The Institute of Director’s Chief Economist Graeme Leach presents his views on today’s Coalition Government’s emergency Budget on the IoD’s You Tube Channel.
Although the IoD did not get all that it hoped, he said it “ticked a lot of boxes” and was a “welcome dose of common sense” to solve the issues at the macro level. He congratulated the chancellor for presenting a “bold and decisive” Budget. Whilst there is always a concern about risking a double dip recession, the IoD knows that getting to grips with public finance is key to increase the prospects of recovery sooner rather than later.
Full details on the Emergency Budget available from Direct.gov site. Summary of changes follow:
- VAT standard rate to increase to 20% 04/01/11 (Zero rated & 5% reduced rate items not affected and no changes to Cash/Annual Accounting schemes. Flat Rate Scheme will be recalculated to reflect the increase in standard rate)
- Insurance Premium Tax – standard rate will go up to 6% per cent & higher rate to 20% on 04/01/11
- Corporation Tax rates to decrease by 1% each year, starting 01/04/22 dropping to 27% then aiming for 24% in year 2014/15. Small profits rate for 2011/12 to be 20%
- Capital Gains Tax – Rates and Entrepreneurs’ Relief stays at 18% per cent (where total taxable gains & income are less than the upper limit of the income tax basic rate band. The 28 per cent rate applies to gains (or any parts of gains) above that limit.
- Entrepreneurs’ Relief will be taxed at 10% with lifetime limit of qualifying gains increasd from £2m to £5m.
- Bank Levy on banks’ balance sheets from 1 January 2011
- Landline Duty – 50p duty on local loops announced in the Pre-Budget Report 2009 will not proceed.
- Capital Allowances – Plant and Machinery Rates reduced from 20% to 18% pa for expenditure in the main rate pool; 10% to 8% pa for special rate pool from April 2012
- Annual Investment Allowance – maximum to be reduced from £100k to to £25k pa from April 2012
- Furnished Holiday Lettings – Government publishing public consultation later in the year on the tax treatment
- Income Tax personal allowance – increased by £1,000 to £7,475 for basic rate tax payers
- National Insurance Contributions – threshold for employers NIC to be raised by £21 pw above indexation from April 2011; new businesses in targeted areas of the UK will have NICs reduced & all will be exempt from first £5k of Class 1 employer NIC for each of their first 10 employees hired for first 12 months of employment
- PAYE – Government to consult employers/payroll providers later in the year on PAYE data
- Enterprise Finance Guarantee – to be increased by £200m to support £700m additional lending until 31/03/11
- Enterprise Capital Fund to support small businesses with high growth potential – extra £37.5m in equity finance funded through £25m Government contribution & £12.5m private co-investment
- Regional Growth Fund announced for 2010/11 & 2012/13 to support increases in business employment & growth (England only)
- Compliance Measures – HMRC Review of Powers: legislation later in 2010 to bring VAT, Insurance Premium Tax, Aggregates Levy, Climate Change Levy, Landfill Tax and Excise Duties within the late filing and late payment penalty regimes; HMRC to consult on proposed powers to require a financial security from employers with history of serious non-compliance eg late/non-payment of PAYE Income Tax & NIC).