This year’s Summer Budget: Reactions from North West businesses
Chancellor George Osborne has revealed the government’s first Budget since being elected to power in back in May.
The announcement covered various topics relevant to businesses here in the North West, from taxation changes affecting owner-managers to extended Sunday trading hours.
We’ve been in touch with a number of firms to see what they had to say about the Budget and its implications for this thriving region of the UK.
Paul Brown, tax partner at North West accountancy HURST
“There were a number of radical changes to the tax system, many of which aim to address imbalances.
“For owner-managed businesses, the most radical change is to the taxation of dividends. Owner-managers who combine dividends and salary to extract money from their companies will need to reassess their approach before the new rules kick in next April.
“The changes affecting buy-to-let landlords, with relief on mortgage interest restricted to the basic rate from April 2017, phased in over four years, were better than some had feared but worse than others had hoped for. Those with large portfolios should brace themselves for a significant hike in their tax bills in the years to come.
“The reduction in corporation tax will significantly enhance the UK’s tax competitiveness on the world stage.
“The annual investment allowance for the purchase of some capital assets will be fixed at £200k a year from January. This is not as good as the current level of £500k but much better than the £25k that was due to be the threshold from the start of next year.”
Carl Martin, chartered financial planner for IFA Carpenter Rees
On Inheritance Tax
“The news that the government is set to introduce an additional nil-rate band when a residence is passed on death to direct descendents is not immediately as advertised. However, we could start to see people up-scaling their houses in order to ensure that the full value of the allowance can be utilised.
“There is currently a consultation under way as to ways in which to restrict this relief for estates worth two million or more. Interestingly, whilst this has been introduced, they have also confirmed that the nil-rate band will be frozen for a further three years.”
On pensions tax relief
“The government’s announcement that it will consult on whether and how to undertake a wider reform of pensions tax relief seems to be more unnecessary tinkering with existing rules. The government already restricts how much can be paid in and have tax relief, and they restrict the maximum amount people can have in their pensions before they pay additional tax as well.
“In my opinion, it would be similar to cap tax relief at the 25 per cent mark and stop capping people’s maximum pension.”
Mike Perls, North West chair for the Institute of Directors (IoD)
“From a regional viewpoint, the devolvement of further powers to the ten councils of Greater Manchester, combined with greater connectivity for the North through Oyster-style integrated ticketing and plans to transform east-west rail and road connections via the new £30m statutory body ‘Transport for the North’, will no doubt drive productivity and strengthen the Northern economy.
“Nationally, cuts to corporation tax and an increase in the employment allowance are welcome news for business, however, the IoD is extremely disappointed that calls to simplify the UK tax system have been overlooked with the already complex inheritance and pensions tax systems further complicated today.
“More could also have been done for small to medium businesses looking to invest for the future with the annual investment allowance fixed for five years but at far too low a rate of £200k.”
Ann-Marie Hopkins from Manchester-based Procure Plus
“I was pleased with the fact that the minimum wage is rising, but our concern with the living wage has always been with trainees and apprentices. The pay for them at the moment can be as low as £2.85 an hour, so the poorest families can’t afford to take on those opportunities.
“Months ago it was highlighted that that wage is far too low, and it still is.”
David Grimes, managing director of Manchester-based My Parcel Delivery
“The Chancellor firmly positioned this budget as one to reward those who work hard and save hard, with a generous increase in the tax free income tax allowance for everyone. But further reductions to corporation tax and an increase in the Annual Investment Allowance are also big boosts for SMEs. And incentivising firms to take on more apprenticeships is a big step towards getting two million more people into work.
“From a regional perspective, Osborne pledged to put the ‘power’ into the Northern Powerhouse. By devolving everything from transport and employment to land commission and even Sunday trading hours, he has given the North West a chance to take control of its own destiny.
“As someone committed to seeing this region compete on the world stage I say bring it on!”
Mark Rawstron, Bilfinger GVA’s regional senior director
“I’m a huge supporter of local powers and devolution but the potential relaxation of Sunday trading hours and devolvement of this to a local level is fraught with issues from a personal viewpoint. How do you reconcile those people who would like to work with those who do not, safeguards are one thing but the reality can be very different. Supporters say it will add to the economy but should we be judging everything from an economic output position? One would like to think not.
“The existing six hours of opening would seem to strike the right balance with those smaller traders able to open for longer. Why change a system which seems to respect varied viewpoints, at least to some extent?”
Martyn Kendrick, Lloyds Bank Commercial Banking’s area director for SME Banking in the North West
“Transport and infrastructure investment is absolutely key to the future prosperity of the north west.
“The Northern Powerhouse project in particular has the potential to be a catalyst for the kind of long-term growth that can help balance the UK economy, and it is reassuring that the chancellor seems determined to make sure the project stays on track.
“It will link Manchester with Liverpool, Leeds and Sheffield in a way that will accelerate economic development across the north, but the government must commit the cash that is needed to upgrade the rail infrastructure without undue delay.
“North west businesses are poised to take advantage of new growth opportunities and Lloyds Bank is committed to supporting them in achieving their full potential and helping Britain prosper.”
Simon Goacher, head of the local government team at North West-based law firm Weightmans
On Sunday trading from a local government perspective
“Enabling councils to choose local shops’ opening hours is a good move and another step forward towards the devolution the new government has promised. For some areas, councils may decide longer trading hours simply are not necessary but for those shopping hubs where the appetite is there to shop for longer the council can make that call, boosting local job prospects and the economy in the process.”
Paul Horton, a partner at Weightmans
On inheritance tax
“Families with sizeable properties will certainly welcome the proposals and it is of highest benefit to ‘property-heavy’ estates, particularly in London and the South East. It is also an attractive proposal to those with valuable property from £1m upwards, as the new allowance will also apply on a sliding scale (which gradually reduces) on homes worth up to £2.35m.
“Additional positive implications include the retrospective nature of the proposals: the additional allowance would be transferable even if one spouse had died before the policy came into effect. As such the policy would benefit existing widows and widowers.
“However, critics have noted this proposal skirts around the main issue of increasing the IHT nil-rate band of £325k. The nil-rate band remains at the same level it was back in 2009 and will continue to be frozen through to 2018. As such, individuals who hold other valuable assets and have varied their wealth (via investments and savings etc) will not reap any benefits and the £175k extra allowance will apply to property only.
“The transfer will also only apply from parent to child (or grandchild as the case may be). Transfers of a main residence to other family members, relatives, partners (i.e. non Registered Civil Partners) or friends will not be included.
“The proposals may also apply where the family home has been sold for downsizing purposes. This additional feature may be introduced to tackle concerns that the proposals would not encourage the property market at a time when housing is at such a shortage.”
Matthew Williamson, Weightmans’ head of retail and leisure
On Sunday trading from a retail perspective
“The current Sunday trading laws do not reflect the way how we shop has changed exponentially over the past 10 years. Whilst it’s important the high street catches up with consumers’ preferences, and enabling people to shop for longer on a Sunday is likely to put the larger retailers in a stronger position to compete against the online retailers, smaller shops which currently have no restrictions placed on them in regards to Sunday trading may find their footfall dip.”
Conrad O’Neill, from Manchester-based property consultant Canning O’Neill
“Overall, this is a budget to support economic growth and encourage businesses to hire, with measures such as the Apprenticeship Levy and people to work with benefits cuts.”
On the Northern Powerhouse
“The news that the government is to provide £30m funding for ‘oyster’ card style public transport payments is positive for the region. This will encourage greater public transport usage, making it easier and hopefully cheaper to use public transport, and hopefully take some pressure off roads.
“Manchester is leading the way for more devolution in the UK. Osborne announced more devolved control of fire services, land and children’s services. This is extremely good news for the city and certainly keeps the Northern Powerhouse momentum going with other cities like Liverpool, Leeds and Sheffield looking to follow suit.”
On buy-to-let mortgage interest tax relief
“I think it is fair that the buy-to-let mortgage interest tax relief should be restricted to basic rate of tax. I don’t think it will have a massive effect on investment. What is good news is that it is not scrapped altogether as we need the private rented sector to supply housing to people who cannot afford or do not want to buy their own home.”
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