It is very good news indeed that the UK is growing at one of the fastest rates of the advanced economies of the world i.e. 3% last year and 2.4% predicted this year. Also, in the last five years creating two million jobs and a further one million in the next Electoral term is quite an accomplishment.
The ‘Banana Republic’ Budget Deficit that our ‘esteemed’ former Prime Minister, Gordon Brown left us with, of 11%, is now 5.5% and falling to 3.7% this year with a surplus at the end of the Electoral term – a major accomplishment for any government in the western world these days.
Corporation Tax is already low by international standards at 20% and will fall to 18% over the next five years. That is an incredible achievement and when you compare it to the USA, where their rates are 35%, it’s all the more so.
The tax free Inheritance Tax allowance of £1million will be very welcome, since it takes low to middle income families out of this odious and punitive Tax completely, which is no bad thing. The former Socialist government always wanted to ‘get rid’ of this facility, which I have never understood. It raises a tiny £3.4billion from a total ‘Tax take’ of £514billion and, therefore, it is almost de minimis.
‘Granny’ can now sleep tight at night in the knowledge that her house will pass to her family, free of all Tax, to help them up the ‘greasy pole of life’. Higher income groups will pay the same Tax over this threshold, which is the highest in the western world, and I suppose is a sop to the Socialists.
Extending Help-to-Buy is a very good thing and a great initiative of this government that has helped first time buyers to buy their own home that ordinarily they would not be able to do. This has stimulated the Property Market at the lower end across the Country aided by the Stamp Duty ‘give-away’ in the Autumn Statement of 2014.
Gordon Brown, as Chancellor, seriously damaged the Pension Market during his ‘reign’ by eliminating the Tax Credits for the Pension Funds and, by doing so, held the FTSE back for five years in the early 2000’s. Private Pension tax breaks have been relentlessly reduced over time (and this Budget was no exception), to the extent that these are a ‘shadow of their former selves’. Private Pensions were designed as a means to protect the individual’s future and since they are far less effective now, ‘Buy-to-Lets’ have been a reasonable alternative. These individuals are not multi-millionaire landlords with hundreds of properties scattered across the Country and frankly, these investments carry a reasonable inherent risk (particularly in recessions) and should be encouraged by governments. The more people that have investments to protect them in old age the less dependent they are on the State. Unfortunately, the Mortgage Interest Tax relief will now be fazed down to the lower tax band that may well affect the ‘Buy-to-Let’ investor and the property market generally.
This will have an effect on the Residential Property Market that is already reeling from high Stamp Duty and, as such, market activity which slowed considerably before the Election and is still meandering along against all predictions.
Banishing Non-Dom’s is not a good move at all since the Exchequer raises some very valuable earnings that will now be lost. You can’t be ‘open for business’ but at the same time issue this policy that will be off-putting for some much needed wealth creators from abroad who would otherwise invest in this country.
I’m not sure of the good sense in raising Stamp Duty to 12% in the Autumn Statement of 2014, since the cost of moving above £1.5million is now 15% (when you include estate agents and solicitors fees) and this is a big ‘hurdle to jump over’ – hence the muted activity in the market place.
I thought the Chancellor was going to do something about this, but clearly he didn’t. I have some innovative thoughts on this subject i.e. by getting the buyer and the seller to share this Tax between them in one way or another. This will give the purchaser more available money to spend, which will help the flagging market, and impose a small Tax on the seller which, frankly, should be affordable since all the Capital Gain is free of Tax.
The Chancellor alluded to Planning Reforms in a White Paper on Friday which we will all be interested to hear since this area needs ‘root and branch’ re-structuring in order for us to produce more homes, both private and affordable. The Neanderthal Planning Process is besieged with too much localism, petty politics and nimbyism that is holding back planning decisions such that we are building a fraction of the number of homes we need in the UK. The government needs to find a ‘quick fix’ to this congested system as they did with Permitted Development for office buildings.
So overall, although winners and losers, clearly this is a competent government who are presiding over a successful economy.
Written by Trevor Abrahmsohn.
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