Chancellor George Osborne made clear from the start of his autumn statement that any tax changes were ‘fiscally neutral’.
That means no new money is available for tax cuts or incentives, so any gain is paid for out of cutting the budget somewhere else.
Britain’s growth prospects look better now than at any time in recent years as the Office of Budget Responsibility upgraded forecasts.
But, reiterated the Chancellor, even though the long term economic plan appears to be working, a lot more belt-tightening lies ahead.
One of the problems for taxpayers is who to believe. The OBR has handed down economic predictions that have proved to be wrong time after time.
Recession miscalculated
The true depth of the recession was miscalculated, according to the latest statistics.
In 2008-09 Britain’s economy shrank 7.2%, not the 6.3% previously forecast, but that 1.1% looks small, but is a 15% undershoot.
“£112 billion wiped off our economy – around £3000 for every household in this country, and one of the sharpest falls in the national income of any economy in the world,” said Osborne.
“It is a reminder of the economic calamity that befell Britain; the simple fact that our country remains poorer as a result of it; and that a lot of work still remains to put that right.”
The main tax changes for individuals, other than to the state pension and capital gains tax for expat property investors, are:
- A new transferable tax allowance between spouses and civil partners is on the way.
From April 2015, partners can switch £1,000 of their personal income tax allowance – providing they are not paying tax at 40% or 45%.
The transferable allowance will be linked to any changes in the personal income tax allowance.
The income shift would seem to be worthwhile only to the lowest paid.
- For investors, share buy-backs in venture capital trusts will not qualify for tax relief from April 2014.
Further consultation for VCT investors is also coming looking at converted share premium accounts to return capital to investors where that return does not reflect profits on the VCT’s investments.
Another change will let investors subscribe for VCT shares via nominees.
No squandering of gains
“We will not let up in dealing with our country’s debts,” said Osborne.
“We will not spend the money from lower borrowing.
“We will not squander the hard-earned gains of the British people.
“The stability and low mortgage rates, lower deficit and falling borrowing have been hard won by this country, but let us be clear: they could easily be lost.
“That’s why we must work through our plan to secure the British economy for the long term.
“So this Autumn Statement is fiscally neutral across the period.”
