Yorkshire taxpayers and business leaders will have found some good news amongst today’s comments by Chancellor George Osborne in his 2013 Budget Speech, which he promised would be a Budget “for people who aspire to work hard and get on”.
Jonathan Davis, corporate and family business advisor at Saffery Champness Chartered Accountants in Harrogate, looks at the detail in today’s Budget Speech and what it means for those living and working in our region.
Mr Davis said:
This Budget packs a lot more than expected and the new flat rate of Corporation tax is particularly welcome.
The Chancellor has done a lot to stimulate growth in the construction industry by underwriting deposits for new homes, and not just for first time buyers, which was a pleasant surprise. This is certainly a step in the right direction.
However construction looked an isolated sector, as the other measures in the Budget are unlikely to do much to trigger further investment elsewhere. A cut in Capital Gains Tax – perhaps from 28% down to 25% – would have been helpful here, encouraging companies to grow and create jobs.
Although politically risky, Osborne could have also done away with the non-dom charge. This does little to deter the mega-wealthy, but can be sufficient to scare off internationally mobile entrepreneurs that are often the ones we look to to provide the creative edge as we claw our way out of the downturn.
However, Mr Davis said that in practice, very little has changed for most people and privately-owned businesses.
Mr Davis said:
The Personal Allowance for income tax will be increased to £10,000 from 2014/15, and the 10% band (applicable to savers and investors only) on the first £2,000 of taxable income will be reduced to 0%, effectively making the Personal Allowance £12,000 for some people.
An exemption from the first £2,000 of employer’s National Insurance for new employees will be welcome news for small employers and those that are planning to start employing people.
As predicted by some, Corporation Tax rates will be merged, with the rate being 20% from 2015/16. This will remove a significant complexity in tax computations, as well as removing tax considerations from much commercial corporate structuring.
The new childcare tax credit that was announced the day before the Budget will be worth £1,200 per child until they reach the age of five. This is clearly designed to encourage parents back into work, and so is probably expected to pay for itself.
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Mr Davis said some of the most interesting comments for those living in North Yorkshire were those that could make an impact to the rural sector.
Mr Davis said:
There is a real incentive here for farm businesses to consider their structure and perhaps incorporate following today’s announced cut in Corporation Tax to 20 per cent particularly since the majority of farm businesses are sole traders or partnerships. But incorporation is not for everyone – it’s good for profitable enterprises where some profits can be retained in the business, but there are also increased administration costs.
There are also important tax issues involved with a decision as to whether the farmhouse should be included in the company, and appropriate advice should be sought.
The announcement of shared equity loans of 20 per cent for buyers who have a 5 per cent deposit is a positive move. Setting the property sale price limit at £600,000 may well see small pockets of development land on the urban fringes particularly being unlocked as more buyers come into the market allowing farmers and landowners an opportunity to capitalise should they wish to do so.
Likewise, the ‘generous tax breaks’ to promote early investment in shale gas will benefit landowners and local communities where there is development potential for this new resource.
The new Employment Allowance providing a £2000 cut in the National Insurance payments made by the employer will encourage jobs, and will be good news for small businesses. The increase in the personal allowance to £10,000 will also be universally welcomed.
A cancellation of the planned September fuel duty increase is also good for the rural economy, albeit fuel (alongside feed and fertilizer) will remain one of the three F’s that continue to weigh down farm businesses.
All in all, a reasonable basket of measures for the rural sector – not a huge basket, but generally positive.
