Summer budget – A ‘damp squib’ – DSG

Paul Hyland – Tax Partner at DSG Accountants in Liverpool gives his post-budget verdict in depth.

With his damp squib of a budget, George Osborne has won few friends in British business. While the budget has hit those relying on working tax credits hard, it’s also been tough on entrepreneurs, and while better off than their smaller counterparts, big business will be scrambling to pay their taxes three months early to fund Corporation Tax cuts.

While the increase in the annual investment allowance at £200k has been hailed as a major boost to small and medium sized firms in Britain – it was really a fiscal no-brainer.

It is vital for the UK economy that businesses reinvest, a fact that’s been recognised for decades and providing tax relief for this business expenditure is a key part of this. The introduction of the new national living wage will however, pose significant challenges to small and medium sized businesses.

The lack of infrastructure investment, particularly in the North, is a continuing concern; raising uncertainties about where the Northern Powerhouse starts and finishes.

It’s crucial that all parts of the region are connected and that there are fast and cost-effective ways for the labour force to move between locations.  Ticketing changes rather than real transport upgrades is a disappointing result.

The increase in taxes on dividends by 7.5% means that many of the North West’s business people will be paying another 7.5% tax next year. A blatant stealth raid, it doesn’t just catch those taking dividends rather than salaries but also businesses where HMRC allow only limited deductions for salary payments, like property owning companies. Whilst it’s clearly crucial that everybody pays their share of taxes, this seems a step to far.

In terms of changes to pensions – our initial feeling after looking at the reduced reliefs for high earners and the consultation document is “here we go again”.  Most people’s real wish is for a stable tax incentivised pension environment. Instead, tax incentivisation is being reduced and there are constant significant changes to the system.  We would like stability, which we believe is vital in this area.

For Landlords who let residential properties and have not formed companies to do so, the restriction on interest relief to basic rate tax could have a substantial impact – this is particularly true for those who are highly geared.  The relief is withdrawn progressively from April 2017 just as interest rates are predicted to rise.