With most of the major changes already released or leaked pre-budget there were not the usual number of new announcements to make.  The Chancellor started by running through the main economic statistics:

• Growth is slower than expected but only by a small amount but the future forecasted increases are still expected
• Inflation will hold at around 4-5% this year but then fall to 2.5% next year then the Bank of England target of 2% in the following year

The starting point for the areas which will affect us all was the statement that UK taxes are too complicated and 42 taxes and reliefs are being abolished and there is going to be a consultation on merging the Income Tax and National Insurance which will reduce bureaucracy for employers and HMRC in administration.  Then onto the actual details:

• Main corporation tax rate will reduce by 2% from April then 1% per annum until it reaches 23% (small companies rate reduction from 21% to 20% from April has already been announced)
• The banker bashing continues as banks will not benefit from this but be subjected to an increase in the bank levy to counteract this!
• To aid the construction industry, encourage jobs and reduce costs of planning, the planning rules will be simplified, the general rule will be planning “will” be granted

Entrepreneurs, business and 50% tax

• Entrepreneurs lifetime relief on gains to be increased from £5-10m
• New and small businesses (less than 10 employees) will be exempt from regulation for three years – further details will follow
• Enterprise Investment Scheme rate of income tax relief to increase from 20-30%
• 50% tax rate is temporary, HMRC have been asked to find out how much this measure actually raises

Property, R&D and Enterprise Zones

• HMRC also looking at tax avoidance on high value properties – both of these measures are looking at making sure all members of society contribute to the tax take.
• £250m commitment to first time buyers of new build property funded from the bank levy, should help 10,000 people
• To encourage R&D, the tax credit will rise to 200% for small businesses from April
• 21 New Enterprise zones will be created in England, 11 were announced and 10 more to follow in the summer.  Following my meeting with Gravesham BC this morning they are hoping Thames Gateway will be one of them

Individuals, charities and motorists

• For pensioners the state pension increase will have an automatic mechanism for annual increases rather than relying on inflation as at present.  Also there will be a simplified state pension system offering a £140pw basic pension
• For charities gift aid claims will be simplified from 2013 to make it easier for them to claim the relief they are due
• To encourage a giving society if you leave more than 10% of your estate to charity your rate of IHT will be reduced by 10% (ie 40-36%)
• For families – council tax has been frozen across the country and child tax credit will increase.
• The already announced £1000 increase in personal tax allowance will offset the increase in NI for lower earners announced by the Labour government.  For 2012/13 the allowance will increase by £630 to a little over £8k and this will not push more people into higher rate tax.
• Smokers and drinkers – Tobacco duties will increase as previously announced and there will be no changes to alcohol duty increases to those previously announced

Motorists and fuel

• Motorists – vehicle excise duty will increase by inflation for cars but frozen for HGVs
• Approved mileage allowance increases to 45p from 40p per mile and also applies to volunteers for charities, this is the first change since 2002!
• The fuel duty increase which was planned for 1 April has been removed and there will be  a 1p reduction from 6pm today funded by a fair fuel stabiliser levied on the petroleum industry
• The full HMRC Overview of Tax Legislation and Rates can be found at http://www.hmrc.gov.uk/budget2011/overview.pdf

The summary above is based on our understanding of the Budget and you should seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”