Spring Budget 2014 review
There was something for everyone – very much a pre-election budget. But apart from the changes to pensions, which are a fairly major reform, there’s nothing very substantial here – it’s very much same as you go.
The Chancellor took a degree of pride in the economic outlook, and I think he’s entitled to do so. At the beginning of the speech he outlined encouraging figures for growth which reflect what we’re seeing in the region.
A huge number of ordinary people will benefit from the abolition of the 10% tax rate on savings up to £5,000 and the increase in the personal allowance which means that they will pay no tax on the first £10,500 of their earnings. Of course this will mean many low earners will pay no income tax at all. I was surprised there wasn’t more for the people who fall into the 40 per cent tax rate as more and more people are falling into this bracket – they are the “squeezed middle” and I hoped to see more for them.
I would expect to see a rush of people going for the new ISA which increases the tax free limit to £15,000 a year and makes saving in that way a lot simpler than it was before.
The changes in pensions remove the need to buy an annuity which have been disliked because of the low returns they offer. It’s quite clever to allow pension holders to draw down their own money without limits – as a consequence this could put a lot of money into the economy and because it will be taxed at the normal rate it will bring in more for the treasury.
From a business point of view, the doubling of the annual investment allowance from £250,000 to £500,000 is good news. This applies to virtually all businesses and means that investing in plant and machinery in their firm will not be subject to tax. This could significantly help businesses which are trying to grow and will be popular in the business community.