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George Bull
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A Budget to be remembered by

On 24 March, Alistair Darling stood up and delivered a Budget for the last time in this Parliament. It is against the bleak backdrop of what appear to be the worst of times for the public finances. He did take the opportunity to ‘compare and contrast’ on many occasions with the management of the last recession making clear this was a political budget. The tax on bankers’ bonuses has paid in part for a £2.5bn stimulus for small and growing businesses – is now the time for great expectations?

Some announcements were widely expected – a temporary (this year and next) relief from Stamp Duty Land Tax on property values up to £250,000 for first time buyers and increases in duty on alcohol (particularly cider) and tobacco.  Other key changes announced were as follows:

  • Entrepreneurs’ relief, giving a reduced (10%) rate of Capital Gains Tax on the first £1 million of applicable gains, is to be extended to the first £2 million of such gains. There are no changes to the main rate of Capital Gains Tax at 18%.
  • The Annual Investment Allowance (AIA) giving relief for capital expenditure by businesses is to double to £100,000.
  • Business rates for small businesses to be cut for one year from 1 October 2009.
  • 'Time to pay’ scheme for business to be extended for the whole of the next Parliament.
  • An increase in the stamp duty land tax rate to 5% from 2011 on residential property costing over £1 million – to pay for the relief being given to first time buyers.
  • The availability of working tax credits for the over 60s is to be extended by changing the minimum hours requirement.  Increases in child tax credits (from 2012) were also promised.
  • An increase in the total amount that can be invested annually in an ISA from £7,200 to £10,200 – half of which may be invested in cash –  had already been announced. The limits are to continue to rise annually in line with inflation.
  • The previously announced fuel duty rises are to be staggered: 1p in April, 1p in October and the balance in January 2011.
  • Inheritance Tax thresholds are to be frozen for four years.

There were also some ‘non-announcements’:

  • The 50% bank bonus payroll tax was viewed as a success – raising £2 billion (twice the amount forecast), but the Chancellor did not propose extending this one-off measure.  Nor did he bring forward a bank transaction tax, saying that this needed to be coordinated internationally to be a success.
  • The car scrappage scheme was also highlighted as a success story, but is also not being continued.

There were no new announcements on VAT, Income Tax or National Insurance: the introduction of a new 50% top rate of tax together with personal allowance reductions for high earners is to continue as planned.

No changes were proposed to the main rates of Capital Gains Tax or Corporation Tax.  The increase in the small companies’ rate of Corporation Tax from 21% to 22% will be deferred until 2011-12.

Alistair Darling’s speech drew to a close asking for support and with a warning that anti-avoidance remained a top priority with tax information exchange agreements to be signed within a few days with Dominica, Grenada and Belize.  In many respects there were very few surprises.