Past Chancellors would not approve of George Osborne appearing on Sunday morning television to discuss the Budget, even if he avoided giving specific details. The contents of the Red Box used to be kept completely secret until the speech itself, and the Chancellor would disappear from public view for weeks in case he let something slip.
Maybe the Budget is less important than it was: the Stock Market is unlikely to be sensitive to UK tax proposals when other factors have greater influence. Perhaps the Chancellor knows that it is as much about politics as policy: he has to sell his proposals to the press and the public, particularly when he is about to announce something as controversial as a cut in the rate of tax for top earners (starting in a year’s time) while the low paid are seeing cuts in Tax Credits. He said loudly in his speech that the 50% rate raised very little money, encouraged tax avoidance and reduced incentives for entrepreneurs – all good points, but it was easy for Ed Miliband to charge him with favouring the wealthy.
By way of balance, the Chancellor cracked down on avoidance of Stamp Duty Land Tax on houses worth over £2m, and closed down a number of other loopholes which the wealthy might have used to avoid paying taxes. However, these will affect fewer people than the income tax measure.
Another problem with modern Budgets is keeping track of what’s being implemented when, because each speech includes measures for this year, next year and even several years further on. Many important details are hidden in over 200 pages of explanation issued by HM Revenue & Customs and the Treasury after the Chancellor sits down. Some of the future measures are described in detail and some are only hinted at.
We have gone through the papers and sorted out the major points from the technical detail. This booklet summarises the significant issues and outlines their likely effect on the average taxpayer.
- Personal allowance increased by £630 in 2012/13, but higher rate threshold lowered
- Further £1,100 increase in personal allowance in April 2013 with a further lowering of the higher rate threshold
- 50% tax rate for those earning over £150,000 to be cut to 45% in April 2013
- Details of Child Benefit clawback from January 2013 announced
- Tax treatment of Enterprise Management Incentive share options to be improved
- Main corporation tax rate cut by 2% to 24% from 1 April 2012 (1% was expected); further cuts to 22% over the next two years
- Immediate increase in Stamp Duty Land Tax to 7% on transfers of residential property for more than £2m
- Measures to stop avoidance of SDLT by putting £2m residences into companies, including a 15% charge on setting up such an arrangement