Budget changes will encourage business, says Mazars
It was a Budget for votes but with some useful initiatives for business and savers, according to international accountancy firm Mazars.
Eric Williams, partner and head of tax at the Birmingham office, said there was particularly good news for the vast majority of employees and pensioners with the move from annual paper tax returns to digital and also for the self-employed and small businesses with the proposed abolition of class 2 National Insurance contributions, which was really a tax in all but name.
HM Revenue and Customs will automatically collate the tax affairs of millions of Britons from employers, banks and investment firms into a single “digital” tax account which can be checked at any time online, although this is unlikely to help many self-employed, or those with more complex tax affairs where HMRC will not have access to online information to complete the new tax account. “Tax bureaucracy can be something of a nightmare for sole traders and small businesses,” commented Mr Williams, and the new digital account process is likely only to be of limited help for them.
“By early 2016, the Chancellor estimates five million small businesses and the first ten million individuals will have access to digital tax accounts. Wisely, many will still want their accountant to advise – on what they can claim, how best to minimise payments, and how to take the business forward – but they will now have a running picture of where they stand.”
Though well leaked in advance, he noted the promised review of the business rates scheme would also be of benefit to traders, both small and large.
He said: “This has been something of a running sore. Most businesses simply want a fair system which is regularly updated. Thankfully the Chancellor has agreed that it needs far reaching reform.
“It will be interesting to see what proposals they come up with. The reform of stamp duty has been widely welcomed by the housing sector; it should equally be possible to address the business rates issue. In the interim the extension of small business rate relief will help.”
The also well leaked relaxation allowing those pensioners who have bought annuities to convert those annuities into up front cash will be a very welcome initiative for many, but it is also a potential minefield for both pensioners and advisors, commented Mr Williams.
“The simplifications to pension funds, abolishing the 55 per cent charge on funds and thus limiting tax on pension funds to the pensioner’s marginal rate of income tax and the relaxation of the tax charge on interest from bank accounts, with the first £1,000 of interest for a basic rate taxpayer and £500 for a higher rate taxpayer being exempt from tax, coupled with the freedom to now withdraw funds from an ISA without penalty, are all welcome too.”
With Mazars having a strong not-for-profit arm, Mr Williams hailed the increase from £5,000 to £8,000 a year in the amount in small cash donations on which charities can claim a gift aid top-up, benefiting over 6,500 small charities.
“Anything which can help charity funding has to be a good thing.”
He went on: “Overall, the enhancements to the personal tax allowance, abolition of class 2 NICs and the improvements to the pensions regime and taxation of interest plus the ISA enhancements, including the very attractive new ‘buy to let’ ISA, will be welcomed by many middle income families and the Chancellor has clearly displayed his political antennae in delivering a Budget designed to win votes in May this year.
“Of course, given the General Election, many of the Budget initiatives will have to await the outcome. For the moment you might as well flip one of the new look 12-sided £1 coins complete with rose, leek, thistle and shamrock.
“To that extent it is almost a phantom Budget yet full of talking points.”