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The first wholly Conservative Budget in almost 19 years sparked largely optimistic reactions from tax experts today, with George Osborne’s plans described as “entirely sensible”, “pleasing”, and akin to the work of one of history’s greatest artists.
“The chancellor resembled Michelangelo as he re-sculpted the UK tax system, taxing dividends, proposing changes to pensions, adding a new tax on banks, cutting corporate tax rates, and restricting interest relief on buy-to-let investments,” said EY’s head of tax policy, Chris Sanger.
The first wholly Conservative Budget in almost 19 years sparked largely optimistic reactions from tax experts today, with George Osborne’s plans described as “entirely sensible”, “pleasing”, and akin to the work of one of history’s greatest artists.
“The chancellor resembled Michelangelo as he re-sculpted the UK tax system, taxing dividends, proposing changes to pensions, adding a new tax on banks, cutting corporate tax rates, and restricting interest relief on buy-to-let investments,” said EY’s head of tax policy, Chris Sanger.
He praised Osborne for going “well beyond what many expected” and for emulating former Tory chancellor Nigel Lawson’s “reputation as a man of principle and principled reform”.
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, believed the summer Budget “should have been bolder”, but praised the chancellor for introducing a national living wage – to reach £9 an hour by 2020 – and for raising the 40% income tax threshold.
The new £500,000 inheritance tax allowance for people with children is a positive step, remarked Roy-Chowdhury, who added that reform of taxation of non-domiciled taxpayers will be a “fair change to a system that was never intended to give high-net worth individual’s permanent tax relief”.
He added, “It is entirely sensible to scrap the status for those who have lived in the UK for 15 out of the past 20 years.”
Shiv Mahalingham, economist at finance adviser Duff & Phelps, called the newly announced lower corporation tax rates a “welcome change that will continue to bring foreign direct investment into the UK and dissuade businesses from relocating operations outside of the UK”.
According to David Brookes, tax partner at BDO, “The surprising reduction in the headline rate of corporation tax to 19% next year and 18% by 2020 was a positive move for businesses, as was the increase of the NIC employment allowance from £2,000 to £3,000.”
Brookes went on to describe as “pleasing” the £200,000 long-term annual investment allowance level for plant and machinery.
But he warned that year’s second Budget “largely bypassed medium-sized businesses” and “could have significant impact on small businesses” through the introduction of the national living wage.
The CEO accounting software provider FreeAgent, Ed Molyneux, agreed with Brookes, calling the Budget a “mixed bag” for small firms, while Mark Abbs, partner at Blick Rothenberg chartered accountants, expressed different doubts about the exchequer’s latest measures.
“The government is now walking a dangerous tightrope between keeping the general public happy and damaging the UK’s ability to compete for the best global talent by removing important incentives to invest and work here,” said Abbs.
Changes to the tax treatment of dividends announced this afternoon represent a “significant tax increase for people with high incomes”, claimed Dermot Callinan, head of private client at KPMG.
“While a million people who receive dividends will see an effective £5,000 tax -free allowance, the changes will increase top-rate taxpayers’ contributions by at least 25%” he added.
“For all that the chancellor wants to encourage saving, the new tax structure could discourage many high income investors from doing so.”
