Today’s Budget was both more positive and less shocking than most expected. Though there was no more mention of the sun shining, the roof is still being fixed with downgrades in forecasts and further cuts to public spending of £3.5bn.
Whilst early announcements included plans to move all schools to academies and the scrapping of the Money Advice Service, a lot of scaremongering didn’t materialise. Our economy is strong, resilient and set to grow faster than any other major advanced economy this year, but with the global economy suffering from low productivity and weak markets, investment in the long term economic plan is paramount according to the Chancellor.
This budget has given many more positive announcements for businesses than those in recent times as George Osborne urges us to invest in business over property. Whilst the OBR remains non-political, Mr Osborne has clearly set his camp in the ‘remain’ camp to stay in the EU.
“A force for stability”
Despite the strong economy and being on course for budget surplus with the deficit down by 2/3rds, UK productivity growth has been revised down.
Britain has it’s highest employment rate at 74.1%, with the lowest proportion of people claiming unemployment benefit since 1974. In the last four months 150,000 more jobs were created than the OBR predicted with one million more to be created over this parliament
All forecasts are based on Britain remaining in the EU:
Borrowing: 2017 - £55.5bn, 2018 - £38.8bn, 2019 - £21.4bn
Surplus: 2020 - £10.4bn, 2021 - £11.5bn
“Redouble our efforts to make Britain fit for the future”
Investment in infrastructure is key to the long term economic plan, again putting businesses at the forefront of the Chancellor’s plans, along with progress in the devolution revolution.
“Tax affects behaviour”
Various schemes are already in place to help people save and buy, these have been extended with announcements today to encourage investment in your own future.
“This is a Budget for the next generation”
Changes to personal taxes encourage the old ‘high wage, low welfare’ society that didn’t get a mention in this year’s Budget. The NHS didn’t receive much attention either, instead the focus was on supporting business and encouraging health through other measures.
“A Budget which gets rid of loopholes for multinationals and gets rid of tax for small businesses”
A lot of plans were announced to simplify business tax and make access to HMRC simpler. Corporation tax was termed “one of the most distortive and unproductive taxes there is”, with announcements on loopholes closing and more frequent payment dates for bigger businesses, but flexibility for smaller businesses to offset losses.
These tax evasion reforms will raise £12bn.
The only mention of IR35 was to clamp down on contractors working in the public sector. From April 2017 the public sector body or agency will become responsible for determining whether IR35 should be applied and be responsible for the tax.
They also go on to confirm they will consult on simpler tests and online tools to help decide whether these rules apply.
We will look into these rules in more detail and produce a separate blog on this topic shortly.
Clamouring for pre-announced changes to be delayed or repealed were to no avail, though thankfully pre-Budget there were more rumours around IR35, though not as severe as those before the Autumn Statement.
The restriction of travel and subsistence expenses for contractors operating through Umbrella Companies (subject to SDC) or operating via a PSC and Inside IR35. Read our blog for a more detailed breakdown.
Dividend tax credits are to be scrapped with new tax rates on dividends and a £5,000 dividend allowance. Read our blog for a more detailed breakdown.
A comprehensive budget with lots of small changes and announcements but ultimately a strong, positive message despite a slowing global economy. Mr Osborne thinks Britain will be in a good position to handle these risks whilst providing a solid future for the next generation.
However, we should keep in mind of the Chancellor’s final warning:
“Storm clouds are gathering again” - winter is coming.Go Back
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