The UK has its first real coalition government since the end of the second World War. It is also the first government in modern times to have a fixed term, in this case 5 years. An extra Budget, which is the financial statement for the UK, was announced on Tuesday 22nd June in response to the financial difficulties that all countries find themselves in.
This has been a difficult time. It is important that the UK has a strong and effective government which can steer the economy and has the authority to bring about the changes which it wants. It would seem that the Conservative Liberal Democrat coalition now has the authority which it needs, and the courage to make difficult decisions.
There will be a Public Spending Review, the results of which will be announced in the autumn, but it is widely expected to produce significant cuts in public spending.
For those still in any doubt, it has already been announced that the Government Department with responsibility for ensuring that UK is ready to join the Euro, and which has been in existence since 2000, will be closed as part of these cuts.
The Budget is positive towards EBS clients, with reductions in company taxes and social costs as well as incentives for newly established companies to create jobs.
The main points of the Budget are:
VAT up from 17.5% to 20.0% from 4th January 2011
Company Taxes The main rate of Corporation tax (for companies with profits over GBP 300000) will reduce from 28% to 27%from 1st April 2011, and go down a further 1% in each of the next three years to be 24% by 1st April 2014. The small companies rate, which is the rate most of our clients’ pay, will be reduced from 21% to 20% from next year also.
Social costs. The free allowance of social costs for employers will increase by GBP 1092 per year from next year.
Social cost relief for new companies. It was announced that any new company formed after 22nd June 2010 will not have to pay the first GBP 5000 of Social Costs due in the first 12 months of employment. This will apply to each of the first 10 persons employed during a three year period. The scheme will start in September but any company which meets the requirements and is established after 22nd June will qualify. Further details will be announced later.
Income tax. The tax free allowance on personal incomes will increase by GBP 1000 to GBP 7475 next year. This will take nearly 1 million people out of paying Income Tax and make a significant reduction in the costs of administering the tax.
Capital Gains Tax. The rate of 18% on non business assets will remain the same for standard rate tax payers. From midnight 22nd June it will rise to 28% for higher rate tax payers. This is designed to close the gap between income and capital tax rates and reduce the incentive for those who can to switch profits between the two.
Entrepreneurs relief, which sets the rate of Capital Gains tax at 10% for business assets for the first GBP 2 Million of gains during a persons lifetime is to be extended to the first GBP 5 Million.
Public sector pay will be frozen at present levels for the next two years for all those with salaries of GBP 21000 per year or more.
Personal consumption. There will be no increases in alcohol or fuel duties.
Social benefits. There will be changes to the social benefits system to make it easier to understand. Some benefits will be withdrawn from higher earners, and some social benefits will be cut or frozen in order to discourage benefit dependency.
Royal Family. The amount paid to the Queen and other members of the Royal Family for her public duties, known as the Civil List, is revised every 10 years and is due for review this year. The current payment has been frozen for one more year.
Bank tax. In cooperation with France, Germany and other European countries, the UK announced a tax on the assets of banks to be implemented next year.
EBS is pleased to be able to offer the possibility of meeting clients in London as well as in Warwick.
Our colleagues Martineau have kindly made available to EBS the use of their meeting rooms in the financial centre of London, at 35 New Bridge Street London EC4V 6BW
You will of course be aware that our main office is in Warwick, and any meeting in London must be arranged in advance.
Directions to the meeting rooms can be found on Martineau’s website.
You may or may not know that we send out highlights of the articles we publish on the website in e-mail newsletter form. If you’d like a handy round-up of business news in the West Midlands, put your e-mail address into the box on the left.
We don’t share your details with anyone else, and we only use it to send you this newsletter.
If you’d like to have a look at the current newsletter, you can click here.
It all began if 1582 when Pope Gregory X111 ordered a change of calendar from the Julian (named after Julius Caesar), which had been in use since 42 BC.
The Julian calendar, which consisted of eleven months of 30 or 31 days and a 28-day February (extended to 29 days every fourth year), was actually quite accurate. It differed from the real solar calendar by only 11½ minutes a year. After centuries, though, even a small inaccuracy like this adds up. By the 1500s it had put the Julian calendar behind the solar calendar by 10 days.
However, the British did not make the change in 1582, so there was a difference of 10 days between the calendar in Britain and the rest of Europe.
By 1752 the difference had increased to 11 days (one calendar had a leap year in 1600, the other did not). Even the British realised that something must be done and they changed to the Gregorian calendar in that year.
Until 1752 the tax year in Great Britain started on 25th March, old New Year’s Day. In order to ensure no loss of tax revenue, the Treasury decided that the taxation year which started on 25th March 1752 would be of the usual length (365 days) and therefore it would end on 4th April, the following tax year beginning on 5th April.
The next difficulty was that 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Therefore the Treasury moved the year start again from 5th to 6th of April, and this date has remained unchanged ever since.
Better Business with Britain