Can the Chancellor magic away the £55bn black hole in his finances for the budget 2016?
Many thought this would be a boring budget – but was it? Firstly – there is fear of us becoming a nanny state with a sugar tax, but many specialists in the public health sector would welcome this change and the former New York mayor, Michael Bloomberg has come out in support. This is partly because he tried to ban extra sugary drinks in New York restaurants, which was overturned by the US Appeals Court. However, for those of us who like a glass of wine – the fizz has been knocked out of our sales. The duty paid will go up at the same rate as inflation – which will be around 2% per annum. An issue that got a lot of attention was the concept of lifetime ISAs, which are aimed at assisting those disillusioned young adults who can’t seem to find a way onto the housing ladder.
What changes will the budget have on business and the tax payer?
The possible good news is that we may have a lot more young people who are going to be budding accountants and bookkeepers; helping our businesses stay alive and grow. This is because Osborne mentioned in today’s budget that ‘we are going to look at teaching maths until the age of 18 for all pupils’.
What are the headline considerations?
The chancellor announced reductions in corporation tax, business rates, North Sea tax, cider and beer duties, increased personal income tax allowance and increased the threshold on the higher rate tax payer.
Where is the money coming from?
It is thought that there is going to be a heavy crack down on tax avoidance and this will be coupled with harsher rules for multinationals. However, will this happen? We aren’t sure that the big sophisticated conglomerates and tech players are going to be so generous with the cash that it’s thought they will be providing.
There will be an increase in basic rate tax payer allowance, which it is thought is estimated to be almost £2bn by 2020, and a similar increase in the allowance for higher rate tax payers of around £600m by 2020. For those people who will be making a profit on investments, capital gains tax is being cut and this is estimated to be the difference of around £735m by 2020.
What is of interest in the UK?
- Productivity has reduced since 2008 and the OBR have downgraded productivity forecasts. On this basis tax receipts, wage growth, and growth in employment could all be lower in the longer term. This does not assist with our existing problems of the ageing population and robots being seen more in the workplace.
- The Chancellor is trying to cut the budget by 2020. We see this as no easy task.
It is expected that George Osborne will realize his taxation income from the below:
- Income Tax of £182bn;
- National Insurance Tax on £126bn;
- Other taxes of £69bn;
- VAT of £139bn;
- Other non taxes of £51bn;
- Corporation tax of £43bn;
- Excise duties of £48bn;
- Council tax of £30bn;
- Business rates of £28bn.
What are the expectations for spend?
- Social security, pensions and benefits of £240bn;
- Health of £145bn;
- Education of £102bn;
- Other (including transactions from the EU) of £49bn;
- Defence of £46bn;
- Public order and safety of £34bn;
- Housing and environment of £34bn;
- Debt interest of £39bn;
- Personal social services of £30bn;
- Transport of £29bn;
- Jobs of £24bn.