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Stephen Smith, Legal Director, CMS

Positive growth forecasts and falling unemployment set a positive tone for this year’s Budget speech, although the Chancellor was frank in his admission that the deficit is still too large. He targeted measures to increase saving, investment, building and exports.  We are reviewing the Budget documents which have now been released and will be blogging on specific measures throughout the afternoon. However, in summary, the key announcements appear to be as follows.

Income tax:
• The income tax personal allowance will increase to £10,000 in April 2014 and to £10,500 in April 2015.
• The higher income tax rate threshold will reduce to £31, 865 from April 2014 and £31,765 from April 2015.
• The national minimum wage will increase.
• Tax free child care of up to £2,000 per child will be available from 2015.

Businesses:
• CT to fall to 21% this year and 20% next year, as previously announced.
• The R&D tax credit rate for small and medium sized businesses will increase from 11% to 14.5%.
• The small enterprise investment scheme regime and 50% CGT relief upon re-investment of chargeable gains will become permanent.
• Tax relief for investment in social enterprises will be available at a rate of 30%.
• The extention to our film tax credit has been approved by the European Commission and a new 20% tax relief will be available for qualifying theatrical productions and 25% for regional touring will be introduced from September 2014.
• The annual investment allowance will double to £500,000 and be extended until the end of 2015 and a 100% investment allowance will be available (details TBC).
• Energy costs will be reduced via reduced green taxes and there will be adjustments to the carbon tax price floor in a £7 billion package.

Real estate:
• Residential properties worth £500k or more which are acquired through companies (other than those purchased for rental) will attract SDLT at the rate of 15% and the annual tax on enveloped dwellings at a rate of £3,500 (for properties worth between £0.5 million and £1 million) and £7,000 (for properties worth between £1 million and £2 million).

Savings and investing:
• The 10% rate of income tax for savers will be abolished.
• Cash and stock ISAs are to be merged and have a £15,000 limit from 1 July 2014.
• Restrictions on drawdowns from defined contribution pension schemes (including caps and penal tax rates) will be removed. Withdrawals will simply be taxed at normal marginal income tax rates.

Building:
• The building of 200,000 new homes will be encouraged through reformed planning rules, new and refurbished cities planned, new rights (and finance) for self-built homes, extended mortgage support and help to buy schemes.

Anti-avoidance:
• HMRC get an increased budget to tackle non-compliance and greater powers to take cash from the bank accounts of individual taxpayers with outstanding tax bills.
• New restrictions will be introduced to prevent the shifting of the profits between corporate group members.
• Up-front payment of tax due in respect of planning falling within the general anti-avoidance rule or the disclosure of tax avoidance schemes will be required, bringing forward payment of an expected £4 billion of tax receipts.
Gambling:
• Fixed odds betting duty increases to 25%.
• Horse race betting levy is extended to book makers based offshore.
• Bingo duty will fall to 10%.

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