Budget 2012: Business has high hopes from Osborne’s budget
CHANCELLOR George Osborne will today set out a range of measures on tax and regulation he hopes will help the private sector grow without damaging the Government’s credibility on cutting the deficit.
His third Budget is expected to see the Chancellor and MP for Tatton in Cheshire, trade a cut in the 50p tax rate for a new tax on multi-million pound properties and signal that the move to a £10,000 income tax threshold will be accelerated.
Business is waiting to see whether Mr Osborne will press ahead with a reduction in corporation tax and extend regional national insurance contributions as well as measures to reduce regulation and provide more funding to encourage innovation and job creation through mechanisms such as the Regional Growth Fund.
Martin Portnoy, tax partner at Ernst & Young in Manchester, said changes to personal taxation were likely to be the major focus of attention today.
“The Coalition has pledged to raise the personal allowance up to £10,000 and possibly even beyond. This will inevitably create a hefty dent in Treasury coffers. Over 3m people would be bought out of the income tax system altogether, resulting in a loss of over £1bn in tax revenue. But the biggest cost will come from the 23 million people who are paying the basic rate of tax, who will each be saving about £500, costing Treasury over £11bn,” he said.
“If we assume that the Chancellor wants to create a broadly ‘revenue neutral’ Budget, where will the Government recoup these loses? It seems likely that Chancellor will look to higher earners.
“However, there is a risk that in an increasingly global economy, these individuals may choose a view of the Swiss Alps, rather than the M25 if their tax burden in the UK becomes too great. It’s a delicate balance, and may require a change of tactics by the Government.”
Mr Osborne is also expected to offer updates on important tax measures affecting business directly.
“This should include the corporate tax rate reduction to 24%, which is due to be legislated for financial year 2014,” said Mr Portnoy. “There is also the consultation on the ‘above the line’ research and development (R&D) tax credit, which will enable the incentive to be recognised within the budgets of the R&D centres rather than as a reduction in corporation tax.”
The Chancellor introduced national insurance holidays for new businesses launched outside of London last year and may well consider extending them.
“There are still major questions over the effectiveness of these initiatives. The employers’ NICs holiday has only had a very limited take up to date and so any extension would require a publicity drive.”
Mr Portnoy, pictured, added: “Overall, business will want to see the delivery of the large changes to the international regime that have been heralded for some time and will then be looking forward to a period of relatively stability. However, faced with the need to stimulate growth, the Chancellor may yet feel the need to introduce further tax incentives and tweak the system further.”
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