I know it's been a long time since my last blog entry, but what can I say as we've had little in the way of exciting tax news since Christmas! However, that all changes today with George Osborne's latest budget which he has billed a s reward for hard work. We've certainly seen some announcements that would seem to echo that, but others I'm not so sure...
- Increase in the personal allowance for income tax to £10,000 by April 2014, a year earlier than expected. Making good on their promise has lifted millions of low earners out of tax altogether and provided a tax saving for those affected of around £700 since the beginning of this parliament. However, none of this has been passed on to middle-England as it has always been accompanied by a lowering of the higher rate tax band. Couple this with the loss of Child Benefit that any household with one person earning in excess of £50,000 per year, and those that work hard (and get paid accordingly) clearly aren't being rewarded, rather it looks like being penalised.
- The proposed cut in mainstream corporation tax is however a completely different story for businesses going forward, as if helps to remove the increase in tax as a business succeeds and becomes more profitable. This coupled with the first £2,000 being taken off all employers National Insurance bills gives a real boost to small businesses too as they look to expand and take on staff.
- Pensions have taken a bit of a hammering though, with the Lifetime Allowance (LTA) being reduced from £1.5 million to £1.25 million, and the contribution limits from £50,000 to £40,000 per annum. There is some good news in the form of fixed protection for those so affect though, and also the drawdown limits go up from 100 per cent to 120 per cent.
- Tax avoidance has come in for some special treatment over the last year, and this budget sees the introduction of the GAAR (or General Anti-Abuse Rule). I must admit that having looked at the guidance my main concern is that it will initially at least be abused by HMRC in the same way that some promoters have abused avoidance strategies. Until we see some cases come through to the tribunal it will be difficult to see how GAAR is going to work in practice.
I haven't covered everything that's been announced here, but these are just my initial thoughts following on from the budget and heading into this evenings seminar with HCB Solicitors where I'll be discussing these and other issues with Iain Wright from Claritas Tax.
