The Budget - Pain and Gain tomorrow?

Bob Wheatcroft, Partner and Head of tax at accountants Armstrong Watson comments on the Budget:

“Budget 2012 was the usual political affair with plenty of digs at the opposition by George Osborne. Most of the detailed changes were leaked to the press in some form in the previous week but we were still left with plenty to chew over.

“In fiscal terms the Chancellor presented this as a neutral Budget so neither a giveaway nor further austerity. He was as positive as he could be in talking up the economy but set out quite clearly the difficult backdrop we face with economic challenges coming from our most important export markets - particularly in Europe.

“There are to be tax cuts – for both high and low earners - but they will be balanced by spending cuts primarily in the welfare budget.

“The headline news for most people will be the £220 tax cut as a result of the promised move towards a £10,000 threshold in this parliament. Top earners are also to benefit from the controversial cut in the top rate from 50% to 45%.

“The wealthy are hit by the hike in Stamp Duty on expensive properties and corporate based avoidance schemes in what looks like a very interesting move from the taxation of income to the taxation of wealth. It isn’t quite a Mansion Tax but it is a gesture in that direction.

“Business will see the most important change as being the further reduction in the Corporation Tax rate to 24% with a promise of a rate of 22% after two years.

“The paradox is that there was plenty of interesting content but, assuming his numbers add up, the fiscal effect of the measures will be muted. There were a number of detailed programmes announced intended to help business and to stimulate growth and employment but clearly the overall position is dependent on the world economy.

“The major headline income tax changes will not take effect until next year and so the impact in most people’s pockets will be in April 2013. He has to hope that the economy is showing signs of recovery by then.”

Bob Wheatcroft

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