Introduction and Budget Highlights

• Introduction
• Highlights

Introduction

This Report, written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the announcements most likely to affect you and your business.

There remains an element of uncertainty regarding the final fiscal measures for 2010/11 given that, if the forthcoming election results in a change of government, there is almost certain to be a second Budget.

With the ongoing challenging economic conditions this Pre-Election Budget was awaited with interest regarding the changes announced by the Chancellor. Notwithstanding any further changes as a consequence of any further Budget, you will need to consider the impact of the announcements on you and, if you are in business, your business.

We can help you evaluate your plans, and adapt them as necessary taking into account the changing economy and your personal and business circumstances. With our help, you can plan ahead embracing the very different economy compared with that which we were accustomed to before the credit crunch.

How to make the most of our services

• Please read the Report as soon as possible.
• Contact us as soon as possible to discuss any action you may be considering, and to review your longer term plans. We always welcome the opportunity to help.

Please note: while most taxation changes take effect from the start of the financial year, or tax year, some may not take effect until 2011, or later. Where relevant, details of these changes have been included in this Report.

This Report is based on press releases issued immediately after the Budget on 24 March 2010. These proposals may be amended. Professional advice should be obtained before acting on any information contained herein.

Highlights

Budget 2010: taxes, borrowing and business support

"This will be a Budget to secure the recovery, tackle borrowing and invest in our industrial future" was how the Chancellor, Alistair Darling summed up the last Budget before the next general election.

It was also a fair summary of the problems he, and the country, face. On the one hand a need to reduce a ballooning deficit and on the other a need to nurture an economic recuperation from one of the worst downturns in generations.

Mr Darling was partially buoyed by figures revealing that government borrowing will not be quite as mountainous as earlier predicted: for this year £167 billion, £11 billion down on previous estimates. For future years, the Chancellor predicted borrowing would stand at £163 billion in 2011, £131 billion in 2011/2012, £110 billion in 2012/13, £89 billion in 2013/14 before reaching £74 billion in 2014/15. However, the Chancellor updated his growth forecasts indicating that he expects growth this year of between 1 and 1.5 per cent rising to between 3 and 3.5 per cent by 2011.

The ongoing Budget debate is likely to focus around the question of when and where to cut spending and by how much.

As expected, Mr Darling held back from implementing deep public spending cuts this year. "I believe that to start cutting now risks derailing the recovery," he said. Although he did promise more drastic action in the spending settlement for the years after 2011. As many believe, it will be the fiscal decisions taken over the next year that will have the weightiest bearing on the economy.

Not heavily loaded with new announcements - most tax measures had been set out in the Pre Budget Report last year - the Budget did, however, offer one eye-catching change: the decision to raise the stamp duty threshold for first time buyers to £250,000. A rise that is to be funded by an increase in the stamp duty charge for homes worth over £1 million to 5 per cent.

There were, though, a number of announcements designed to help long suffering smaller businesses. The annual investment allowance is doubling to £100,000; business rates relief will effectively remove rates bills for 345,000 firms for a year; entrepreneurs will benefit from a raising of the threshold for relief on capital gains tax; and the fuel duty increase is to be staggered, with a penny rise in April and October and the remainder in January 2011.

National insurance contributions, however, will still be climbing by 1 per cent as from April 2011 to the disappointment of many.

Business funding came under the spotlight too. The partly state-owned banks will be under a duty to boost their lending to small firms in particular, and a new national investment corporation will be streamlining investment and financial help for SMEs.

The full extent of the spending cuts that are necessary to address the deficit may still be a decision for the future as does the growth of GDP. How far the Budget goes towards securing the recovery, tackling borrowing and investing in industry, only time will tell.