For business there was little change from the measures previously announced and published last December in the draft Finance Bill clauses. The main change was to double the annual investment allowance (which gives taxpayers a 100% tax deduction for qualifying capital expenditure) to £500,000. This will take effect from 1 April 2014, but will only last until 31 December 2015. From 1 January 2016 it will revert to £25,000 unless increased in a subsequent Budget. For small, innovative, loss-making businesses there was extra help with the Research and Development credit payable increasing from 11% to 14.5%. In addition to these measures, manufacturers will be helped by the reductions in the carbon price floor resulting in reduced energy bills.
The Chancellor also announced that the European Commission has given approval for the film production reliefs to be extended. In addition changes to video games tax relief will be made to bring it in line with EU state aid requirements. Furthermore, tax reliefs for certain qualifying theatre and touring productions were announced; further consultation will take place over the next few months.
Another business sector with specific tax changes is oil and gas. In particular there will be a review looking at the structure of the North Sea oil and gas tax régime to ensure that it is fit for purpose given the mature status of the basin.
There will also be a review of the Bank Levy over the next few months with changes to take effect from 1 January 2015.
The major change that most international business will be focusing on is BEPS – the multinational project for countering base erosion and profit shifting. Currently, this is being led by the OECD with proposals announced earlier this week for consultation. A discussion paper has also been published by the UK Government setting out their position on this topic.
For individuals, the major changes announced were for savers. The reforms to defined contribution pension schemes are fundamental. They will increase the flexibility for retirees to benefit from their pension pot by removing the obligation to convert their pension savings into an annuity. It will also be possible to draw down from a pension pot and tax will only be paid at the normal marginal rate (20%,40% or 45%) and not the current punitive rate of 55%. These changes will fundamentally affect how people plan for their retirement and equally have a major impact on the pensions, investment funds and life insurance industries. 2014 will be a transitional year for these changes, with full implementation of the proposal occurring after 6 April 2015.
As well as the pensions changes, the two types of individual saving accounts (ISAs) will be merged into one and the annual allowance increased to £15,000 from 1 July 2014. This will increase the investment flexibility of these tax free wrappers. The 10% tax band (which most people thought had been abolished already) for savers will be abolished and a new 0% tax band on savings income introduced up to £5,000 with effect from 6 April 2015. This will only apply to individuals with taxable income, after deducting their personal allowance, of less than £5,000.
For the sin taxes (tobacco, gambling, alcohol duties) there is a mixed picture. Tobacco duties are increasing 2% above the rate of inflation for the next 5 years, whilst alcohol duties on beer are reducing by 1p and on whisky and other spirits duties are frozen. There is also help for standard ciders with duty being frozen. Bingo duty is halved to 10%, but duty on fixed odds betting terminals are increased to 25%.
So to summarise – Non smoking, Bingo playing OAPs who like a tipple and have healthy bank balances are the big winners of the Budget announcements today, whilst yesterday the winners were working families with children. These measures will be directly felt in the pockets of voters come 2015.