South: Baker Tilly reaction to Budget – some degree of reassurance for businesses

Responding to the chancellor’s Budget statement, Nick Parker, tax partner at Baker Tilly’s Basingstoke office, said: "This was an impressive display of political theatre by the chancellor, having said that we may have to wait until the ‘real’ Budget after the General Election to see if the new policy announcements made today will remain on the agenda, and what else we can expect to see in the next Parliamentary term.

"For businesses, this Budget provided some degree of reassurance with no further change to corporation tax, small technical changes to VAT rules and an announcement about a review of business rates. There will also be some relief among business owners that the allowances for Entrepreneurs Relief remain untouched, although there has been some tightening of the rules on eligibility.

"For private individuals, the chancellor announced further increases in the personal allowance, taking more people out of the income tax system, but whether this will actually make lower earners significantly better off is a moot point, as many will suffer a reduction in tax credits as a result.

"One of the headline announcements was the proclaimed abolition of the tax return but this evident good news hides the reality that taxpayers will still have to confirm their income online and add details of income that HMRC doesn’t know about, such as business or investment income. Related to this, the announcement that from April next year the first £1,000 of the interest earned on savings will be completely tax-free for basic taxpayers will be welcomed by many, while higher rate taxpayers will benefit from a £500 allowance. This initiative should, in theory, help to make the new tax reporting system simpler, but we have some concerns given that HMRC doesn’t have an unblemished record when it comes to introducing new online services.

"The introduction of new Help to Buy ISAs will provide first-time buyers with a generous perk, but it will be interesting to see what impact this has on the housing market without a significant increase in supply. This new policy, combined with the imminent pensions liberation changes and the revised stamp duty system could help to provide upward pressure on house prices at a time when they have started to cool.

"Many people had predicted that the Government would increase the thresholds at which Inheritance Tax is paid, but instead what we got was a review on the avoidance of Inheritance Tax particularly through the use of deeds of variation. This could be a means of preparing the ground for introducing a rise in the IHT threshold at a later date.

"Although there were no new specific measures mentioned in relation to tax avoidance, the chancellor continued to highlight the Government’s determination to reduce options for aggressive tax planning and we wait to see what effect the numerous new measures already introduced will have in practice as we start to see them work."