Some ‘Big’ changes were announced in George Osborne’s ‘Big Budget’.
For working individuals the ‘Big’ ticket item is most likely to be the move to a living wage, but for many this may be counteracted by welfare cuts. Higher earners will benefit from an increased personal allowance and an increase in the threshold at which they will pay higher rates of tax, but may have reduced tax relief on pension contributions and pay more tax on dividend income.
Most property owners will no longer have to worry about inheritance tax when leaving their homes to family on their death thanks to a new nil rate band but property investors will be worrying about a new restriction on income tax relief for finance costs of buy-to-let properties eating into their investment return.
Businesses received some welcome clarity on the annual investment allowance, which will be set permanently at £200,000 from January 2016. The allowance means businesses can deduct the full cost of qualifying items, including plant and equipment, up to a total value of £200,000 from their profits before tax. This will help cash flow because full tax relief is given in the year items are purchased, rather than over several years. The allowance has previously only been increased temporarily; therefore, making it a permanent increase will help businesses plan their spending on longer term investments. They may not welcome the prospect of increased wages, although compensated for by a reduction in the rate of corporation tax from 20% to 19% in 2017 and then to 18% in 2020.
For businesses this appears a fairly balanced Budget but beware those who choose to exploit the complexities of our tax legislation as there is an increasing armoury available to HM Revenue & Customs to challenge any undesired tax planning.
Angela Haig, Tax Partner, Henderson Loggie www.hlca.co.uk
