It’s being dubbed “a Budget for the people”, but George Osborne needs to make sure his second Budget Day of 2015 has something for everyone, including business.
When the Chancellor for the Exchequer stands up to speak on July 8th, it will be his first Budget speech on behalf of a single-Party government, unrestricted by compromises to the Liberal Democrats.
For many, that is a worrying prospect, with an expectation that the next round of cuts will come quickly and hit hard. However, I think there is a lot that we can look out for that will be positive.
It’s quite possible that a rise in the personal allowance to £12,500 will be announced, along with an increase to £50,000 of the starting point at which the higher rate of tax applies, though it may take the whole of the Conservatives’ next five years in government for these increases to be fully introduced. Yes, inflation could eat into that extra cash in pocket, as it starts to rise again from its current negative level. However, it could also be the case that these tax adjustments would mitigate a rise in the cost of living and ease that pressure.
It will be very interesting to see what happens to the levels of Inheritance Tax (IHT). Had Labour won the Election, many whose property values had increased since they purchased their homes may have been fearing the announcement of a mansion tax, but we now face the prospect of a potential increase in the nil rate band of IHT, which currently stands at £325,000. Rumours have mentioned an increased limit of £1 million, particularly where this might be set against the value of the family home. However, the ‘small print’ that will follow any announcements may in fact show this to be a ‘joint amount’ that may sometimes be available to married couples and civil partners.
If the Chancellor intends to continue supporting jobs and training for school and college leavers and graduates, he needs to be looking at extending the National Insurance Contributions reduction for apprentices and young people.
In the business world, eyes will be on the level of allowance for capital investment, which currently stands at £500,000 but is scheduled to drop to just £25,000 from 1 January 2016, which wouldn’t be good for growth. There is speculation that although the allowance will reduce it may only be by half rather than 95%!. However, in his recent letter to the Entrepreneurs’ Forum’s chairman, Nigel Mills, Mr Osborne is understood to have stated his support for such incentives as SEIS, EIS and the Venture Capital Trust scheme, so support for investment in business is not likely to be too far from his plans. Could it be that the threat of this particular allowance cut is a red herring? One would hope so.
And finally, it would be impossible not to look towards the Budget without considering the issue of the Northern Powerhouse. I would like to think there may be some surprises in store with perhaps some potential tax incentives on offer to the North East, should it agree to creating a regional Mayor in return for a good deal from the Government.
We have seen some success in the Tees Valley with enterprise zones, so perhaps we could benefit from more of the same, or indeed a specific Northern Powerhouse Tax Relief for those investing in growth would be an interesting prospect.
Whatever the case, this unusual second Budget promises to deliver an interesting insight into the next five years of Conservative government.