Don’t fancy reading the full 108 pages? Our handy digest is for you
Stamp duty and “the Tory mansion tax”
This was the biggie – the rabbit in the hat. The government has changed the way stamp duty works, effective from midnight tonight.
Up until now, you paid stamp duty as a percentage on your total home purchase price, and the percentage leapt up when you surpassed certain values. For example, properties up to £250,000 were liable for stamp duty of 1%, but those worth £250,001 were liable for 3% of the total price – so if you bought a property for £250,000 you’d pay £2,500 stamp duty, but if you paid just one pound more for your home you’d have to pay £7,500 in stamp duty.
(This meant there was a lot of bunching around property values just before they hit the level up in stamp duty charges, and left no man’s lands where people would be very reluctant to purchase in the region of £250,001 to around £275,000, for example – making it hard to sell a home you’d bought for £250,00 but which hadn’t appreciated more than £20,000-£30,000 or so beyond that.)
Osborne has now changed that system to more of a sliding scale, where you pay increased percentages for amounts over certain bands, rather than on the whole amount, more like income tax bands. You can find out all about how it works in our quick summary, and in the handy government’s explaining document, which includes a calculator for new stamp duty charges.
Here are some examples, from the government’s document, on how the new system will affect homes in varying price brackets:
The changes will benefit 98% of homebuyers, Osborne claims.
But anyone buying a home worth more than £925,000 suffers, as their stamp duty is now increased to 10% on the part of the property falling within the band up to £1.5m, and 12% thereafter. Little wonder this measure is already being called the “Tory mansion tax”.
The “Google tax”: a crackdown on multinationals dodging taxes
It’s already been dubbed the “Google tax”, but its official name is the Diverted Profits Tax. This is a new 25% tax on the profits of multinationals that do business here but that divert profits overseas to avoid paying UK corporation tax via “artificial arrangements”.
We’re not yet sure how this will be enforced, but bearing in mind Amazon, for example, has made billions in revenues in the UK in the past few years but paid next to no corporation tax, we’re very interested to see how this one pans out.
Clampdown on taxing banks
Osborne is, it seems, fed up with banks carrying forward losses from previous years to offset tax liabilities in later years. This is a process entirely within the rules of corporation tax, and which is standard practice for all companies.
But the banks have racked up rather larger losses than most of us thanks to the financial crisis, meaning that some would in theory be entitled to get away with paying no corporation tax for up to 20 years. The Treasury notes that corporation tax receipts from banks fell from £7.3bn in 2006-07 to £1.6bn in 2013-14 as a result of this carrying forward and offsetting.
So Osborne is hereby restricting the amount of banks’ profits that can be offset by carried-forward losses to 50%.
Business rates: a ray of sunshine (but just a ray for now)
Small businesses rate relief will be extended to April 2016 (an extra year). That means 385,000 small businesses will continue to benefit from 100% rate relief, and another 190,000 from the tapered relief.
Smaller high street retailers (those with a rateable property value of up to £50,000) have been given a small boost from the £1,000 business rates discount granted in last year’s Autumn Statement. That discount is now being increased to £1,500 in 2015-16.
In other news, business leaders and lobby groups have been calling on the government to reduce rates for as long as we can remember. Osborne has finally conceded just a teeny bit, by announcing the government will launch a review into rates. But will anything actually come of it? We’ll have to wait and see.
Also, the 2% cap on the RPI increase in the business rates multiplier (for all businesses) will be extended to April 2016.
Access to finance: will these measures really help?
The Enterprise Finance Guarantee scheme will benefit from up to £500m of new lending in 2015-16.
The British Business Bank’s Enterprise Capital Funds programme gets another £400m to support venture capital.
These two measures make up the £900m boost for small businesses we reported this morning.
Also, the Funding for Lending scheme will be extended for another year, to 29 January 2016. The aim of the scheme is to improve SMEs’ access to bank finance by lowering borrowing costs, but its effectiveness has been questioned by businesses. They often say it’s not the interest rates that are prohibitive in their access to finance, but the fact they find it difficult to get approved for traditional bank finance.
Exporting: encouraging, but not exciting
A new £20m support package for first-time exporters was announced – which isn’t a huge amount, but every little helps.
The chancellor also said at the beginning of his speech that he’d be helping the UK build trade links with Africa, Asia and South America.
Supporting innovation through R&D
R&D (research and development) tax credits will be increased from 10% to 11% for business, and up from 225% to 230% for small and medium-sized businesses, from 1 April 2015.
The government is also going to invest £5.9bn into research infrastructure in the UK from 2016-21.
Reducing red tape… maybe
Well, you might say we’ve heard stuff like this a hundred times before, but the government is saying it’ll make benefits and expenses admin more straightforward. It aims to reduce the admin burden on employers by £20m per year.
A nice boost for social investing and social enterprise
Socially responsible b
usiness gets a boost from a consultation into “a new relief for indirect investment in social enterprises”.
Also, the annual investment relief for the Social Investment Tax Relief (SITR) has been increased to £5m a year.
If you spotted something we’ve missed that will affect you, let us know @londonlovesbiz @sophiehobson or in comments below…