Cider Freeze, 'New Isas' and Higher Income Allowance to Benefit South West
A new style of more flexible Isas to encourage further saving are among the key measures announced in George Osborne’s 5th budget revealed today.
In a surprise late announcement Mr Osborne said that cash shares and Isas would be combined into a ‘New Isa’ which allows savers to accumulate tax-free savings of up to £15,000 each year beginning from July 1st.
In 2010/11 more than half of people in the South West were reported to have Isas an today’s announcement is thought to benefit around 648,000 South West Isa holders.
Speaking to MPs the Chancellor, George Osborne, said: “This is a Budget for building a resilient economy. If you're a maker, a doer or a saver: this Budget is for you.
"It is all part of a long term economic plan - a plan that is delivering security for the people of this country."
The chancellor also announced changes to the personal income allowance £10,500 which will see 29,000 fewer people pay tax in the South West.
Mr Osborne also outlined a new Pensioner Bond paying market leading rates to be available from January to all people over 65, with interest rates of 2.8% for one-year bonds and 4% for three-year bonds.
Pensioners should soon also be able to cash in as much of their pension pot as they want, removing the need to buy an annuity.
The chancellor also announced the scrapping of the wine and sprit escalator, a freeze on cider duty and a drop of 1p a pint on beer duty.
The wine and sprit escalator was dropped in favour of new rules to prevent alcohol from being sold below the minimum tax rate that the chancellor said: “helps stop supermarkets from undercutting pubs and helps stop problem drinking.”
The news has been welcomed by hospitality businesses and from the drinks industry.
Commenting on the beer duty cut Brigid Simmonds, Chief Executive of the British Beer and Pub Association, says: “This is fantastic news, and George Osborne is again the toast of Britain’s brewers, pubs and pubgoers. It will protect over 7,000 jobs over two years, mostly jobs of younger people in Britain’s pubs.
“It also shows that the Government has understood our case, that taxes on British beer had become far too high, and action was long overdue.
“I hope this becomes a trend in future budgets for this British-made, lower-strength drink.”
Anne-Marie Morris, Conservative MP for Teignbridge, also welcomed the news via twitter, she writes: “Over 63,000 people employed in the drinks industry in the South West, the cut on beer duty is great news for both Teignbridge & South West.”
The Chancellor also announced an extra £140m for repairs and maintenance to flood defences and £200m for potholes following the extreme winter storms.
Other announcements include more business support from the including plans to double the amount of finance available to £3bn on a national scheme to boost exports
There are also several measures to improve the support for small housebuilders and SMEs.
Charles Kislingbury, head of the Exeter office at JLL, said: “We welcome the announcement of a new Development Investment Bank for small house builders and self-builders. The barriers to entry are too high for this group, which has weakened competition, innovation and importantly the ability to deliver higher volumes of new supply across the UK. This investment bank is exactly the sort of strategic intervention needed to expand housing supply.
“We also welcome the announcement to extend the deadline by which businesses will need to have located in an Enterprise Zone in order to claim business rate discounts to 31 March 2018. However this is a missed opportunity to announce a fundamental reform of the business rate system and align it with other tax policies announced today.
“In last year’s Autumn Statement, the Chancellor threw the retail industry a bone by announcing a 2 per cent cap and rate relief, but what struggling retailers would benefit from is an announcement about bringing forward business rates valuations and a guarantee about future valuations being undertaken on a more frequent basis.
"Our recent research highlighted that 40 per cent of UK locations are losing out as a result of the deferral and further damage to the UK high street is inevitable if revaluations are delayed in the future.”
Also announced were plans for a 15% rise on Stamp duty on homes worth more £500,000 bought by companies, as part of a range of new tax avoidance measures.
This will be unwelcome news to many in the housing industry who have lobbied for a scrapping of stamp duty.
Commenting on the housing impact in the 2014 Budget, Simon Rubinsohn, RICS Chief Economist said: “A tight budget with little room for manoeuvre. Yet again, the Chancellor has failed to overhaul the stamp duty system, with wages well below inflation and rents rising rapidly for years, many have been struggling to save for a deposit, let alone meet a huge tax bill.
“Helping more buyers to enter at the lower end of the market would have resulted in more movement and transactions, freeing up stagnant property chains and bringing badly-needed housing onto the market.
“Meanwhile, the much trailed extension of Help to Buy to 2020 is not a game changer. While it provides certainty and clarity to the market, creating another 120,000 new build properties is still a modest target. We need over 230,000 just to meet current demand. Much more needs to be done.”
Ed Miliband MP, Leader of the Labour Party, speaking in response to the Budget statement in the House of Commons, also levelled criticism at the Chancellor, he said: “The Chancellor spoke for nearly an hour, but he did not mention one central fact: The working people of Britain are worse off under the Tories. Living standards down, month after month, year after year.”
Mr Miliband argued that the Living Standards under the Coalition government had fallen for 44 out of the 45 months having fallen by £1,600 a year.
He also argued that the new higher tax allowance didn’t tell ‘the rest of the story’ after the rises to VAT, Insurance tax and the so-called ‘Granny tax’ among the 24 tax rises introduced since George Osborne became chancellor.
Mr Miliband continued: “It’s a classic Tory con, Give with one hand and take far more away with another.Same old Tories.
“Now the Chancellor painted a picture of the country today that millions of people simply will not recognise.
“Because this is Cameron’s Britain 2014; 350,000 people going to food banks, 400,000 disabled people paying the Bedroom Tax, 1 million more people paying 40p tax, 4.6 million families facing cuts to tax credits.”
Mr Miliband continued , that if elected the Labour Party would; “Freeze energy bills.Guarantee jobs for unemployed young people.Cut business rates. Reform the banks.Get 200,000 homes built a year and abolish the Bedroom Tax.”
Other measures announced in the Budget speech include:
• Extending the Help to Buy scheme to 2020
• A five-year cap on structural welfare spending from 2015 excluding pensions and Job Seekers Allowance. The cap will start at£119bn and then rise in line with inflation.
• Freezing the "carbon floor" price by paid businesses in a bid to cut energy bills
• A new "garden city" at Ebbsfleet in addition to plans for 200,000 new homes
• Scrapping VAT on air ambulance services and inshore rescue boats
• Scrapping inheritance tax for members of the emergency services who die during the course of duty.
• Reform of air passenger duty so all long haul flights carry the same tax rate as currently charged for flights to USA
Exeter Chartered Accountants Simpkins Edwards Partner, Adrian Hemmings, commented: “This year’s budget set out the coalition’s stall for the election in 14 months. The Chancellor revealed many targeted measures that will have a cumulative effect in boosting those parts of the economy that he wishes to focus on, whilst at the same time increasing income through tighter tax compliance.
“The budget included a raft of measures to support businesses and encourage increased investment in manufacture, export and recruitment. Of particular pertinence to businesses in the South West region is the doubling of the annual investment allowance to £500,000, which has been extended to the end of 2015, and the R&D tax credit – measures that send a clear signal for businesses to invest in growth.
“The area of personal finance represents another hot topic, with the announcement of a big reform on the regime for ISAs and the annual limit now raised to £15,000. There are also several changes aimed at radically increasing flexibility for pensioners, meaning that now more than ever, people approaching retirement will need to carefully plan the best way to attain a sustainable and tax efficient income. This is potentially the most significant change in pension legislation in a generation.”
