2010 Budget Investor Highlights

24th Mar '10 by Edward Croft

9 comments 4586 reads

2010 Budget Highlights for Investors news story image We've been blogging on Reuters Live - and it can be read here. Thanks to Darron Preston for joining us with some excellent acerbic comments! Overall, and primarily as expected, the budget rather sat on the fence with the 'big decisions'. But for investors there was some good news in that the headline Capital Gains Tax rate has stayed still at 18% and that indexation has started for the annual ISA allowance. How long CGT can remain at this level remains to be seen, and surely it's a target after the election.

The Entrepeneurs relief threshold in the CGT rate doubled to £2m and small and Medium sized businesses benefited from cuts in business rates, increases in the investment allowance and commitments from the governement that RBS & Lloyds will lend half of a £94bn pot to SMEs. Having said that, this has to be counterbalanced by the impact on small businesses of the previously announced tax increases such as National Insurance (a topic which Cameron picked up on in his reply).

The deficit continues to balloon though, in spite of the spin that borrowing this year is 'less than forecast' at £167bn. One does wonder when the tough measures to tackle it will be introduced - all the window dressing won't fix the truth of the matter that we are in for years of tax hikes. The pre budget report highlighted the increases to National Insurance Contributions and the 50% rate for high earners, but of course there are hidden 'stealth tax increases' by freezing the tax thresholds. Lots of tactical "it could have been a lot worse but for us" political positioning from Labour and lots of good "it's all your fault" posturing from Cameron afterwards. I think this election is going to be a good scrap!

Some Budget Highlights

GDP forecast reduced to 3-3.5% for 2011, and confirmed at 1-1.5% for this year. Borrowing this year should now be £11bn lower than forecast at £167bn. Global coordination to drive recovery - confirms support for international bank levy. £16bn claimed for coming asset sales including Tote, Dartford Crossing and Student Loan book.
Good news for savers… Indexation has begun for ISA limits… our users will be very happy about that!
£2bn Small Business growth package paid for by Bankers Bonuses Tax. Business rates…

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djpreston

24th Mar '10

Cheers Ed - glad to help (couldnt resist the jibes).

Well, exactly as expected. A party political election campaign.

Unforutnately the voting is now so jerrymandered by the massed ranks of public servants and benefit dependent that this is probably enough to win it for them.

Most disapointing is the lack of any moves to reduce red tape via tax simplification (NI rolled into Income tax) or reducing corproation tax rates to encourage companies to stay in the Uk as opposed to leaving for sunnier climes.

Of course no one will point out the raft of pre announced tax rises hiding like a gone off Easter Egg for the new tax year......

Off to the pub now. Some Cider for me, for I am a Cider drinker - cue the music.......

StrollingMolby

Thoroughly entertaining to read both your comments after the event! Any further info on how indexation of ISA allowances will work, and from when?

SM

A review of the complete Budget document doesn't yield much additional info.

http://www.hm-treasury.gov.uk/d/budget2010_complete.pdf

(P.63) Alongside the substantial support provided, the Government is setting policy to create the right economic environment to promote stability and growth in the medium term. Key actions include:

a comprehensive strategy to promote savings, including the launch of the Saving Gateway in July 2010 and the indexation of ISA limits over the next Parliament;

So no clues really as yet, but let's assume a 2% increase per year, and the allowance will rise approx £200 per year (rounded down), from £10,200 in tax-year 2010/11 to £10,400 in 2011/12, and so on.

I bet ISA Managers will be thrilled by this annual increase, brought in just as the coding-in of the £10,200 allowance for all eligible investors has been completed !

HMRC tend to be quick out of the blocks with their reaction to ISA changes in the Budget so will wait for their bulletin.

Fangorn

Am a cider drinker too. Not impressed with the massive hike in duty on this specific beverage.

If they have such an issue with underage drinking (which is apparently what these gigantic above inflation increases targetting specific tipples are for) why not just increase the drinking age, and punish those who dont comply.

Why do the rest of us have to suffer financially.

Is it worth the hassle for the investment industry to continually adjust the ISA allowance?

http://www.hm-treasury.gov.uk/d/budget2010_pressnotices_complete.pdf

...from 6 April 2011, and annually over the course of the next Parliament, the ISA limits will be indexed in line with the Retail Prices Index (RPI). Each September's RPI figure will be used to set the ISA limits for the following tax year. The ISA limits will be rounded each year to the nearest multiple of £120 to enable savers to plan monthly saving more easily.

Each round of adjustments to the investment administration system behind the ISA will either be passed on to the investor, or, less-likely, absorbed by the ISA Manager. It may even see some ISA Managers sticking with the £10,200 allowance (if permitted by HMRC), or withdrawing from the industry altogether and removing choice.

This is a piece of electioneering by Darling ahead of the anticipated May election, but the problems to sort out this mess will be pushed into the next parliament, to be worried about another day.

fuiseog

"Why do the rest of us have to suffer financially"

'Cause they want your money, of course. Drink up please!

fuiseog (not cider drinker)

honey

5th Apr '10

This comment has been moderated

7th Apr '10

Aaand relax, cider drinkers. The 10% tax rise on cider has been dropped as there is not enough time to process the change in law before the government dissolves on 12 April.

"The Tories and Lib Dems welcomed the cider move but Labour say it will be re-introduced if they are re-elected."

A broadband tax and an electoral reform referendum also miss the boat.

http://news.bbc.co.uk/1/hi/uk_politics/election_2010/8606373.stm

Phew thank goodness for that! :)

2010 Budget Investor Highlights

Some Budget Highlights

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Edward Croft

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