Budget 19th March 2014 – Piper Hulse Comment

"A budget for building a resilient economy" was George Osborne's headline for today's budget. ........ "a budget for the makers, the doers and the savers".

So what? Peel back the political propaganda and there were important announcements in today's budget which are relevant to us all. Overall I feel it's a sensible budget (because it's self funding and addresses the deficit) with a few interesting points (e.g. ISA's, Pensions, Capital Allowances, Higher Rate Band) but most importantly one which appears to be increasing the overall confidence in economic growth.

Read on for the highlights I've selected and call me if you would like to discuss the impact on you and your business.

Tim Hulse

Director, Piper Hulse Accountancy & Business Advisory

 

Economic Growth (GDP)

The forecast for 2014/15 was raised to 2.7%, and to 2.3% for 2015/16. The UK Economy was said to be the fastest growing Economy for "Advanced Economies" and was said to be back to the position it was 6 years ago before the recession. This is important for;

  • Confidence - the more confident people are the more they will spend, the more we all spend the greater the Economic growth.
  • Raising taxes - more tax is raised by increasing the volume (IE. Spending more) than is raised by increasing tax rates or cutting spending. Thus a growing economy is the most important factor in tackling the budget deficit.

budgetforacest

Budget Deficit 

This remains the most important issue for the Government. He claimed that the UK is achieving the largest budget deficit reduction programme of any major economy. In his words the deficit (what the government spends less tax income) was 11% at the start of his term, and had reduced to 6.6% this year and is expected to reduce to 5.5% in 2014/15. He also added that the deficit is expected to be eliminated by 2018/19, however, this is too far off to forecast with any accuracy. This is important to us all because;

  • Confidence - a reducing deficit improves the overall UK economic environment and increases the confidence for spending and investing.
  • Interest expenditure - less is spent on interest payments servicing the national debt. A higher % of the tax income is available to fund government spending, and thus less borrowing is needed to make up the deficit.

 

Highlights for Individuals
  • Personal allowance - the amount we can earn before paying income tax will increase to £10,000 from 6th April 2014 and to £10,500 from 6th April 2015.
  • Higher Rate Tax (40%) - The threshold for paying the higher rate tax has been increased to £41,865 from 6th April 2014. This is a welcome change in direction for many; in previous years this limit was reduced to compensate for the increases in the personal allowances.
  • ISA allowances - are to increase to £15,000 per annum from 1st July 2014. In addition the current limits on the cash content of ISA's (50% of the allowance) are to be abolished so that the ISA's could be 100% cash or 100% equity or anywhere in between.
  • Pensions - a number of revisions on draw down, tax free lump sums and the removal of the requirement to buy an Annuity. Seek specialist advice here.
  • Child care - tax free child care support of upto £2,000 for each child.
  • Duties - cigarettes up, petrol no change, with a few changes, 1p a pint reduction in beer, no increase in spirits or cider. Bingo duty cut to 10%, Fixed Odds betting duty increased to 25%. What odds did they have on that!

 

Highlights for Business
  • Employers NI - a £2,000 reduction in employers National Insurance from 6th April 2014 (this was announced last year).
  • Capital Allowances (AIA) - are to be increased from £250,000 per annum to £500,000 per annum until the end of 2015. This is good news to many of us, as in the past Capital Allowances have varied wildly from £25,000 to £1m. Many (including us) have campaigned for some time for consistency in Capital Allowances to enable business to sensibly plan investments.
  • Energy prices for business - a £7bn programme to cut energy bills for manufacturers. The devil will be in the detail here.
  • Class 2 NI (Self Employed) - this is to be collected as part of Self Assessment in the future rather than separately. Although not a tax cut a welcome and sensible simplification.
  • Lending for exporters - Increasing the available fund to £3bn and halving the interest rate. Regular readers will know that I'm always sceptical of any new lending scheme announced in a Budget, as they are in every budget and rarely make a meaningful difference.

 

Important Disclaimer

The Budget report is hot off the press this afternoon and the above commentary has been prepared on the same day with limited time to digest the news and check the accuracy and completeness. Please read the above in this context and you rely on the accuracy of the information at your own risk. This material is published for the information purposes only. It provides only an overview of the information digested at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by Piper Hulse Limited.