Budget 2007

1. Introduction
2. Income Tax
3. Capital Gains Tax
4. Corporation and Business Tax
5. Indirect Taxes
6. Stamp Duties
7. Miscellaneous

1. Introduction

What a nice man. You know, that sun tanned Scottish chap who is giving all those things away. Wouldn’t he make a good Prime Minister?

He might do but, as always, Gordon Brown’s eleventh Budget features something close to fiscal neutrality. What this means is that while he appears to be giving away money hand over fist, he has to be taking it back from somewhere else in order to do so.

The future PM certainly talks a good game these days. He ensured that everyone knows where his priorities lie. Money is going to families and children, pensioners and schools, the environment and the local community as well as to charities.

However, in an effort to ensure that everybody loves him, Gordon Brown promised to offer record increases for intelligence and counter-terrorism as well as the armed forces. He also promised record spending on the NHS, which will be getting a 10% increase or an additional £10 billion next year.

Some of the financing may not matter to the man or woman in the street very much in that, for example, he is planning to double asset sales this year i.e. privatising many public businesses. This is a one-off gain but certainly looks good if you have an eye on persuading your party and the voters that you are the perfect man to lead the country.

The real headlines from a tax viewpoint are in connection with cuts, although in most cases there is a sting in the tail.

The basic rate of income tax is reducing from 22% to 20% - but not until April of next year. However, as a quid pro quo, the 10% lower rate band is to be abolished on earnings and pensions (so who is a friend to pensioners?).

There have been similar developments on the corporation tax side with the basic rate set to reduce from 30% to 28% from April 2008. At the same time, a new 100% investment allowance worth up to £50,000 is introduced; and the long-life asset capital allowances rate increases from 6% to 10%.

There are negatives in both cases. The small companies’ rate of corporation tax is to increase from 19% to 20% and to 22% by 2009/10. The normal capital allowance rate reduces from 25% to 20% from April 2008 and industrial and agricultural buildings allowances begin a phase out at the same time and will disappear by 2011.

Many other measures will take effect over a period of years, which one could see as Mr Brown handcuffing his successor whoever that might be. In theory at least, he is looking so far ahead that at some point that role might even be filled by George Osborne who would probably be delighted to implement some of these measures.

You can be sure that there will be some stealth taxes hidden in the small print of a Budget speech that is beginning to use a hip new kind of language that we have not heard in the past. We are used to hearing about cash savings, either immediately or at some distant future date. Now though, the new buzz term is carbon saving and changes to excise duties have been specifically geared to help those with small cars at the expense of people owning gas-guzzlers.

This year, the area that often causes most controversy, the fags and booze regime, has very much stayed the same with inflationary rather than penalising increases, the theme.

Gordon Brown had no doubt about the popularity of his Budget. He concluded by saying that “This is a Budget for Britain’s families, this is a Budget for fairness and this is a Budget for the future”. He clearly believes that that future will feature his own presence as Prime Minister before too long and has done his best to make friends before he finally hands over the dispatch box.