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News - 20 March 2013

The ABDS 2013 Budget Report

The Chancellor, George Osborne's fourth Budget lasted 54 minutes and contained a raft of measures as well as data about the state of the economy. Here is ABDS guide to the salient points.

The main headlines are:

• the corporate tax rate is to fall to 20%
• £3bn in new government investment spending
• funding for 15,000 new affordable homes
• a 1p cut in beer tax and a cancelled 13p tax rise on fuel
• £11bn in under-spending by government departments
• our national debt is to peak at 85.6% of GDP

Tax

The chancellor announced tax cuts for both beer drinkers and drivers.
A planned rise in fuel tax was cancelled, meaning that petrol would be 13p per litre cheaper than it would have otherwise been had all the fuel duties to date had been levied.

That is equivalent to 10% of the current average price of a litre of standard unleaded, which is 139.9p this month according to data from the AA. About 58% of that price is already tax.

Personal tax

• Tax free child care" worth £1,200 per child and increased support for families with children on universal credit.
• Capital Gains Tax (CGT) holiday to be extended.
• Planned 3p rise in fuel duty for September scrapped.
• Flat rate pension worth £144 a week to be brought forward to 2016.
• From 2014 no personal tax on first £10,000 of earnings.
• Help for employees includes more generous shareholder status, CGT relief for sales of business to workers, tax help to return to work after sickness and a doubling to £10,000 for tax free loans for commuters' season tickets.
• Abolition of stamp duty on shares traded on growth share markets like AIM.
• Tax-free child care vouchers worth £1,200 per child and increased support for families with children on universal credit.

Corporate Tax

• Corporate tax rate to be lowered by 1% to 20% to match main personal tax rate, in April 2015.
• Small company and main rates of corporation tax to be merged at 20p.
• New Employment Allowance will take the first £2,000 off the employer National Insurance bill of every company in the country.
• Tax avoidance deals with Isle of Man and Channel Islands, and we will "name and shame" those who promote avoidance schemes.
• Measures on tax avoidance and evasion to bring in £3bn in unpaid taxes.
• Bank levy rate to increase to 0.142% next year to off-set reductions in corporate tax.
• Around 450,000 small businesses - one third of all employers - will pay no employer National Insurance at all after introduction of Employment Allowance in April 2014.


New measures on tax avoidance will bring in £3bn. The Government will also name and shame promoters of tax avoidance schemes.

Economy

• The independent Office for Budget Responsibility predicts Britain will avoid a second quarter of negative growth and slipping into a triple-dip recession.
• OBR forecasts put growth for this year at 0.6%, down a massive 50% on its previous forecast of 1.2%.
• Growth forecasts for the coming years are now: 2014 - 1.8%, 2015 - 2.3%, 2016 - 2.7% and 2017 - 2.8%.
• The deficit has been cut by a third from 11.2% of GDP in 2009/10 to 7.4% this year. It is forecast to drop to 2.2% by 2017/18.
• Borrowing forecast to hit £114bn this year instead of £108bn, then £108bn in 2014, £97bn in 2014/15, then £87bn, £61bn and £42bn in the following years.
• Proportion of national income spent by the state has fallen to 43.6%.
• Public sector net debt is due to be 75.9% of GDP this year, then 79.2%, 82.6%, 85.1%, 85.6% in following years falling to 84.8% in 2017/18.
• The Bank of England's Monetary Policy Committee keeps 2% inflation target but has its remit overhauled.

Cuts and spending

• Whitehall departmental budgets cut by 1% after £11bn underspend this year.
• Bigger savings of £11.5bn sought in the spending review for 2015/16, up from £10bn.
• Public sector pay cap of 1% extended by a year in 2015/16. Military will receive full recommended increase and be exempt from changes to profession pay.
• New limit on "annually managed expenditure", which includes welfare budget, debt interest and payments to the EU.
• Deal on the European budget secured by David Cameron saved Britain £3.5bn.
• Infrastructure plans given an annual £3bn boost from 2015/16 - a total of £15bn over the next decade.
• Plans to take forward two major carbon capture and storage projects.
• "Generous" new tax regime to promote early investment in shale gas and tax

Social care

• Flat rate pension of £144-a-week brought forward to 2016.
• Cap on social care introduced in 2017 and set at £72,000. Threshold for means-testing of help raised from £23,000 to £118,000.
• Help for Equitable Life Policy holders extended to those who bought with-profits annuities before 1992, with payments of £5,000 and extra £5,000 for those on lowest incomes.

Housing

• New Help-to-Buy scheme for people struggling to build up a deposit to buy a house, worth £130bn in loans.
• Includes £3.5bn for shared equity loans and Government interest-free loan worth 20% of the value of a new build house.
• New mortgage guarantee, sufficient to support £130bn worth of loans, to help people who cannot afford a big deposit and help those buying up to 90% of homes.

Jobs

• 600,000 more jobs expected this year than at same time last year
• Claimant count to fall by 60,000

Transport and infrastructure

• £3bn extra for new projects every year from 2015-16 until 2020, total of £15bn

Energy and the environment

• Tax incentives for ultra low-emission cars
• Pottery industry in Midlands to be exempt from climate change levy
• Tax allowances for investment in shale gas


Impact on Investment

• "Shale gas is part of the future" - new planning and investment guidelines to be published.
• Seed investment for business start-up to be improved through Government procurement budgets, growth vouchers and controls on regulators' charges.

Little known facts about the Budget

Where does the word 'budget' come from?
The word 'budget' comes from an old French word 'bougette' which meant 'little bag'.

What is the Budget Box?
The Budget Box is the red, leather-covered box containing the Budget Speech.
Traditionally the Chancellor is photographed on Budget day on the steps of 11 Downing Street holding up the Budget Box.

How old is the Budget Box
The current budget box was first used in 2010 replacing the original Budget Box of William Gladstone which was 150 years old

What is the longest Budget speech?
The longest continuous Budget speech was by William Gladstone on 18 April 1853, lasting 4 hours and 45 minutes.

What is the shortest Budget speech?
Benjamin Disraeli's 1867 Budget speech lasted only 45 minutes.

Can the Chancellor drink alcohol during the Budget speech?
Yes. Previous Chancellors have chosen whisky (Kenneth Clarke), gin and tonic (Geoffrey Howe), brandy and water (Benjamin Disraeli), sherry and beaten egg (Gladstone) and spritzer (Nigel Lawson). Gordon Brown chose to drink mineral water. Alistair Darling and George Osborne also drank water.
 

If you need any help and advice on the implications of the 2013 Budget contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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