2010 Budget Investor Highlights

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 to be cut for 1 year from October. No CGT rise from 18%.  Capital Gains tax entrepreneurs relief threshold raised to £2m from £1m. Annual investment allowance doubled to 100k for small business. RBS/LLoyds to provide £94bn in lending - half of which to SMEs in next year.
• Cider under attack - duty increased by 10% above inflation. Alcohol 2% above inflation. Tobacco 1% above inflation.
• Property: Stamp duty super tax on £1m + homes - 5%. Doubled the stamp duty limit for First Time Buyer (for 2 years), scrapped on properties worth up to £250,000.
• Tax Evasion: Tax information exchange agreements with 3 additional countries. Dominica, Grenada, Belize. £500m to be raised. Signed 'within a few days'. Cue heckle re. Ashcroft.
• Other: Everyone to have a basic bank account - up to 1million more people over 5 years & £2bn fund to invest in Green Energy projects - wind farms etc (2/3 cost of new nuclear power station). No-one over 75 will pay tax on first £10k of pension.