Business and capital taxes
Stuart Adam
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Business tax measures
• Small firms’ business rates relief more generous for 1 year from October
– Costs one-off £410m
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Business rates, 2010
£10 000
£10,000
Before Budget
£9,000
After Budget
g
£8 000
£8,000
Taxx payablle
£7,000
£6,000
£5,000
£4,000
£3,000
£2,000
£1,000
£0
£0
£5,000
£10,000
£15,000
Rateable value
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£20,000
£25,000
Business tax measures
• Small firms’ business rates relief more generous for 1 year from October
– Costs one-off £410m
• Annual investment allowance doubled from £50,000 to £100,000
– Costs £110m
• CGT entrepreneurs’ relief lifetime limit doubled from £1m to £2m
– Costs £90m
• Tax relief for video games industry – design subject to consultation
– Costs £50m
• Usual raft of anti-avoidance and anti-evasion measures
– Raises about £500m
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Personal capital taxes
• Inheritance tax threshold to be frozen at £325,000 until 2014-15
– Yield rises each y
year;; £110m by
y 2012-13
• ISA limits to be indexed to inflation throughout next Parliament
– Cost rises each y
year;; £5m by
y 2012-13
• Stamp duty threshold doubled from £125,000 to £250,000 for
first-time buyers from March 2010 to March 2012
– Conservatives propose doing the same thing permanently
– Costs one-off £550m over the two years
• Stamp duty rate increased from 4% to 5% for residential property
purchases above £1m from April 2011
– Labour’s own ‘mansion tax’ – but very different from Lib Dems’
– Raises £230m
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Stamp duty land tax
Residential properties
£60 000
£60,000
May 1997
February 2010
Stamp d
duty
£50,000
First time buyers,
buyers March 2010 - March 2012
From April 2011
£40,000
£30,000
£20,000
£10,000
£0
£0
£200,000
£400,000
£600,000
Sale price
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£800,000 £1,000,000 £1,200,000
Temporary stamp duty cut for first-time buyers
• Cuts in stamp duty generally welcome
– Stamp
p duty
y is an exceptionally
p
y damaging
g g tax
• First-time buyers buying £125-250,000 properties in relevant
period pay up to £2,500 less
– Part of benefit may go to those selling them the properties
• Complexity in defining “first-time” buyers
• Temporary cut for first-time buyers creates distortions
– Bring
g transactions forward into the window
– Delay buying first property until can afford somewhere more
expensive
– Buy bigger first property than ideally would like
– Penalises joint ownership
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New top rate of stamp duty
• Increases in stamp duty generally unwelcome
– Stamp
p duty
y is an exceptionally
p
y damaging
g g tax
• Those buying £1m+ properties pay at least £10,000 more
– Most of loss likely to be passed on to current owners as prices fall
• £1 higher price can mean £10,000 higher tax bill
– Why should this be desirable?
– Enormous incentive to keep transactions below £1m
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Summary
• One-off giveaways
– Stamp
p duty,
y, business rates
• Thereafter, mainly tax rises for the wealthy…
– Stamp duty, inheritance tax
• …but continued tax cuts for business
– Annual investment allowance
allowance, entrepreneurs’
entrepreneurs relief
• Increasingly
Increasingl inter
interventionist
entionist ind
industrial
strial polic
policy
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