Post Budget Comment

POST-BUDGET COMMENT

By Sarah Case, Director, Newport office, Broomfield & Alexander

Mr Darling’s first budget on 12 March came at a time when the Government wants to balance the books to offset the cost of Northern Rock, defence and increased spending in schools. He was never going to cut taxes or make changes to the plans announced a year ago by Gordon Brown.

As predicted, he robustly defended his pre-Budget report announcements and confirmed that he is proceeding with the new 18% flat rate of capital gains tax, a new 10% tax rate - dubbed the Entrepreneurs’ relief - on the first £1m of the sales of businesses, and the annual flat £30,000 tax charge for “non-domiciles”. These measures will lead to businesses having to pay more tax.

The Chancellor confirmed that the controversial proposals on 'income shifting', which affect all family businesses, are to go ahead, but not until 2009, so there is time for more modifications to this administratively-burdensome and impractical scheme. Again, once these rules are in place, business - particularly family businesses - will pay more tax.

Mr Darling had been widely predicted to increase alcohol duties, particularly on “alcopops”, to try to reduce binge drinking, but he only added a modest amount to the cost of alcohol. This will disappoint many.

The budget was also not very “green”; the only green measures were centred around stamp duty savings for buying “zero carbon flats”, more car tax for “gas guzzlers” and the threat that the Government will interject if shops are not doing enough to reduce carrier bags. Arguably, the green credentials of the Budget were damaged by the decision to postpone the scheduled 2p a litre increase in duty until October.

Business will be disappointed that there is no sign of further cuts to corporation tax, although, to be realistic, they were always unlikely as the Government wants to keep the rate internationally competitive.

Some good news for families came in the form of changes to the tax and benefit system which are mainly targeted at those with children. The Government is also intent on working with energy companies to make paying for fuel via pre-payment meters cheaper.

So standing back, the good news is that there are no major new tax changes and there seems to be no significant additional spending by the Government that would need more tax raises. With “stability” featuring as the most overused word in his budget speech, Mr Darling was simply consolidating what had already been announced.

Sarah Case is a director of professional advisors Broomfield & Alexander. She can be contacted on 01633 265828 or by email at Cases@broomfield.co.uk..

Date: 20th March