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George Osbourne wants to increase tax reciepts

George Osbourne

The Chancellor has now given us his Autumn Statement on the state of the UKs economy in his last major economic speech before next year’s general election.

He started off by giving us the good news that UK plc was the fastest growing economy in the G7 with the growth forecast revised upwards from the 2.7% predicted in March, to 3%, with average growth over the next five years at 2.3%.

Stamp Duty

He is reforming the way that residential property stamp duty is calculated, so from 5th December 2014 rates will apply only to that part of the property price that falls within each band.

The nil band on the first £125,000 will remain then rise to 2% on the portion up to £250,000, 5% up to £925,000, then 10% up to £1.5m and a whopping 12% on anything above that. This will save anyone buying an average priced home, £4,500.

Fuel

The big news was that fuel duty on petrol will remain frozen and to boost oil and shale gas exploration, he is allowing the Sovereign wealth fund for north of England to keep benefits of shale gas exploration and is reducing the levy on the oil industry by 2%.

Savings and Pensions

To encourage people to save into ISAs George is allowing spouses to be able to inherit their partner’s ISAs tax free upon their death, as well as increasing the ISA threshold increases from £15,000 to £15,240 next April.

Additionally, the pension pot of anyone who dies before the age of 75, will now go tax free to their dependents.

Personal Tax

The great news for couples with young children is that Air Passenger Duty is to be scrapped for under-12s from 1st May next year and for under-16s the following year; and we will all benefit from a further hike in the Personal tax allowance, which will increase to £10,600 next April.

    Other measures announced, include:

  • Inheritance tax to be virtually eliminated, for families of aid workers who die in course of their work.
  • 55% death tax passed on to loved ones to be abolished.
  • The Libor fines will be used to support Gurkhas and other service veterans and their families.
  • Higher rate income tax threshold to rise to £42,385 next year

Business Tax

A much heralded tax is to be introduced on multi-nationals, dubbed by the press as the “Google Tax”, this will be a 25% tax on profits generated by multi-nationals, that they’ve shifted out of the UK to avoid UK Corporation Tax and is set to raise £1bn over five years.

    Other measures announced, include:

  • Hospices and search & rescue organisations will now be able to reclaim all VAT they incur.
  • In future, Banks will not be able to offset all of the huge losses they incurred 5 years ago and are still incurring because of huge regulatory fines, in full against current profits. The offset allowed will now be restricted to 50% of the profit.
  • The rich Russian oligarchs and et al will now have a £90,000 charge, if they’ve been residing in the UK for years but claiming non-dom status to avoid UK tax.
  • There will be a significant increase in the R&D tax credit for small and medium-sized (SMEs) firms. SME’s will also benefit from £500m of bank lending plus £400m government-backed venture capital funds which invest in SMEs.
  • Most business rates will be frozen and the remainder will have any increase inflation-linked, subject to a cap of 2%.
  • National Insurance on young apprentices is to be abolished from April next year.

And finally, from next year employers will be able to give employees tax-free “benefits” of up to £50 a year. This now opens the way to tax-efficient turkeys, bottles of champagne or hampers of goodies, and a very jolly Christmas 2015.

So why hasn’t Mr Osborne done more?

Well for a start the deficit, whilst being halved since 2010, is still stubbornly high and tax receipts are lower than forecast. George is still following Plan A, it’s just that instead of taking 5 years, it is now predicted to be 2019 before Britain will be in surplus.

I don’t personally blame the Chancellor, as he could not realistically have forecast how long and deep most of the problems affecting countries in the Eurozone (By far our biggest trading partner) would be or last, which is a back-handed compliment on how well the UK has done over the same period. Also as over 5% of government income comes from North Sea oil and gas, a near 60% drop in oil prices over the last two years clearly hasn’t helped; plus the income from financial services is still a fraction of what it was 6 years ago.

The statistical information from the Office of Budget Responsibility, on which the Chancellor has relied on in deciding what to do, will be released over the next few days. Once I have had the opportunity to examine this pile of data, I will of course let you know if there is anything hidden in the fine print.

 

If any of you would like more detailed information on any aspect of the Autumn Statement, send me an e-mail and I’ll be pleased to advise further.


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