Current Issues | Tax | 20th March 2014
In recent years the Chancellor’s annual Budget statement has become a bit of a guessing game. Will there be any big surprises or is the cat already out of the bag? This year it was the turn of Mr Osborne’s Liberal Democrat coalition partners to try and spoil the party by ‘leaking’ the increase in the personal allowance.
As usual, we have to wade through the detail to get to grips with what has already been announced in the Autumn pre-Budget report and what is genuinely new. Given that this was the penultimate Budget before a General Election – and the last where any new measures can actually be implemented – was there anything left for the Chancellor to keep up his sleeve?
A doubling of the annual 100% investment allowance to £500,000 is certainly noteworthy, effectively allowing businesses to claim the full tax benefit in the year of investment, rather than spreading this over many years.
On the personal taxes front, although the personal allowance was increased as expected, in a break with recent practice there is to be no corresponding reduction in the point at which 40% tax kicks in. In previous Budgets the effect of this has been to remove the benefit of the increase in the personal allowance for higher rate taxpayers.
Then there were the changes to the rules on the taxation of pensions. Interestingly, this includes the 'right to advice' – tacit acknowledgement perhaps of just how complicated the rules have become. Unfortunately the same principles of clarity and simplicity appear unlikely to apply to tax any time soon – neither do we expect the Chancellor to extend the same right to tax advice!
Meanwhile the crackdown on tax avoidance continues, including a new requirement for those participating in marketed schemes to pay the tax upfront, removing the hoped-for cash flow benefit until the matter has been resolved by the Courts. This is likely to prove a major disincentive for this type of tax avoidance. It is important to remember, however, that many legitimate tax planning opportunities remain.
As ever, my colleagues at Shipleys are here to guide you through the finer points of the Budget – or even to discuss the merits of the new £1 coin unveiled alongside it!