Budget Comment
Credible path back to fiscal security or reckless and putting thousands of jobs at risk? It is certainly a fine line that the chancellor must tread in administering strong medicine to a sick patient without killing them off.
Whatever your view of the June 22nd Budget, and there is certainly a huge division in viewpoints from Local Authorities and other public sector organisations, to the markets and credit rating agencies, it is clear that some fairly drastic and potentially unpopular action was required.
Attending a Chamber of Commerce Budget Briefing this morning, the general view was “could have been worse!”. Indeed, the rise in CGT could have been greater and the resultant impact on property and other tradeable assets much worse. Behind the main headlines we will see a further tightening of anti avoidance legislation to curb schemes which have been doing the rounds. For a quick view on the impact of the CGT increase the link below to the BBC Business page may prove useful:
http://news.bbc.co.uk/1/hi/business/10384599.stm
Elswhere, the VAT increase does impact us all, consumers and businesses alike. But again, it could have been worse. National Insurance Bands have been altered and some incentives put in place for those starting new businesses and some additional personal alowances. Changes to Corporation Tax, from a simplistic viewpoint should make the UK a more attractive place to start and carry out business but, reductions in capital allowances could counter this for certain sectors.
Back to property, and in terms of using up ones annual CGT allowance property was never the ideal tool to achieve this. Unit sizes are too large and indivisible, unlike individual shares, transactions costs are relatively high and the market relatively illiquid, again compared to shares. Applying the higher rate of tax immediately may seem harsh but avoids a period of frantic selling to crystalise gains, which may have de-stabillised the market in certain types of property.
Finally, and because this is a personal view of the budget, it only remains for me to remind readers that the budget itself and the issues covered are complex and the commentary above certainly does not constitute advice. Please consult your financial adviser on the detailed content of the budget.
