For another year the Chancellor has been tasked with delivering the government’s plans to restore the country to financial good health whilst juggling the need to continue with austerity cuts, maintain the tax take and keep the voters happy. Naturally my interest is drawn to Mr Osborne’s announcements on changes to taxation.
The Top Earners
To help boost the economy and make the UK the most attractive place to do business in Europe, Mr Osborne has cut down by 2% with immediate effect the Main corporate tax rate to 24% (no change to the Small company rate). It was also suggested that the reduction to 23% will be accelerated to next year also.
To reverse and suppress the flow of high earners overseas he has cut the additional rate of tax for higher earners (those earning over £150,000) from 50% to 45% from next April and this could quite possibly result in an increase in the corresponding tax take.
Whilst apparently giving to the rich from the one hand, Mr Osborne is taking with the other by imposing a 7% stamp duty on homes worth over £2 million from tonight and has gone one step further by imposing a 15% stamp duty on homes bought through a company to close the loop hole used of late by wealthy individuals. Furthermore, the bank levy has been increased from 0.088% to 0.105% from January 2013.
In line with initial indications, for families where someone in a household earns more than £60,000 their child benefit will be cut and there is a tapering of the benefit where someone in a household earns more than £50,000.
The 2013/14 higher rate tax threshold will be reduced by £1,025 to £41,450 representing a cost of £461 in cash terms.
There will be a consultation for smaller businesses with a turnover of up to £77,000
The Lower Earners
To help those on lower incomes, the personal allowance will rise from £8,105 to £9,205 from April next year which represents a substantially above inflationary rise.
In part this has no doubt been funded by the phasing out of tax breaks for the over 65’s by freezing the agre-related allowances which will have a double impact on couples.
Robin Hood Budget
Some Liberal Democrats are touting this as the Robin Hood budget but the reality is, on balance the Government is neither stealing from the rich nor the poor.