Budget 2011: What are the implications for investors?

We were over at the Reuters live Budget Blog earlier discussing this year's budget. In summary, it was a fiscally neutral budget, reflecting the spending constraints that the Government is under. In terms of OBR forecasts, 2011 growth has been downgraded from 2.1% to 1.7%, while inflation is expected between 4% and 5% in 2011, falling to 2.5% in 2012. 

It definitely had a strong pro-Business flavour. The big news was the cut in corporate tax, with the Chancellor aiming to make Britain the most competitive corporate tax regime in the G20 ("Britain is open for business"). This will now be reduced by 2% this year, targeting a 23% rate within 3 years. 

There was a fair amount in the Budget to help SMEs/startups through a range of initiatives including reform of EIS and VCT, funding for new enterprise zones and improving access to credit facilities for smaller companies. There was not much sign of any of the recommendations we made to fix SME-funding, but we live in hope! This was accompanied by (and somewhat in contradiction of) a declared intent to simplify the tax system.  On that note, as expected, the tax and national insurance systems may be merged (about time!) but it's only a consultation exercise, so don't expect it to be swift. And reforming the Planning system will apparently be a priority so good news hopefully for Britain's rotting infrastructure.

Frankly, though, there wasn't that much to encourage savings and investment, but that's perhaps not surprising in the difficult fiscal circumstances. The most salient bullets for investors seemed to be:

• Investors in North Sea Oil won't be pleased to hear that there is an increase in taxes (from 20% to 32%) on oil and gas producers in order to fund a cut in fuel duty. This apparently only applies when the oil price is over $75 apparently. As an illustration, Nautical Petroleum is currently down almost 8% following the budget.
• Bad news (relatively) for Bank investors in that they will not benefit from lower corporation tax (the bank levy will be adjusted).
• Inheritance tax will be reduced by 10% for those who leave 10%+ of their estate to charity. George makes a smart play for the Big Society!
• Increase in tax relief for EIS schemes from 20% to 30%, plus 4x increase in the EIS allowance. 
• Under new rules, VCTs and EIS will be able to invest in businesses with gross assets of up to £15m, instead of the current level of £7m. The businesses they invest can also employ up to 200 people, up from 50.
• Personal income tax allowance will rise to £8105 in April 2012. 
• 50% top rate of tax to remain for the time being but it will be reviewed. 
• £2bn extra funding for the "Green Investment Bank" which will launch in 2012
• Inclusion of AIM shares in ISAs? Nope. What about a reduction of stamp duty? Some changes for property investors but not for equity investors. A Commitment to introducing Regulation Fair Disclosure to level the playing field for investors? Nope. How about harmonisation of tax treatment of different equity investing instruments to prevent liquidity being transferred from the cash equity market into spreadbetting and contracts for difference? Oh well, maybe next time!
• And, finally, if you've got a private jet, bad luck... The running cost has just increased by c. 0.05% due to the addition of air passenger duty for the first time, but I can't say we really sympathise!

Did we miss anything? Let us know below. You can see more details of what was announced here.