Billed as a budget for the next generation, Chancellor of the Exchequer, Rt. Hon George Osborne MP’s statement also sought to give taxpayers more money in their pockets now
Will budget for the future result in greater disposable income now?
British Chancellor of the Exchequer, Rt. Hon George Osborne MP’s 2016 budget lowers tax rates for small businesses, however large businesses face stamp duty and other increases. The surprise announcement of government-backed “Lifetime ISAs” is designed to help everyone save more for the future. But, at the same time as this, larger personal tax allowances were announced – suggesting people will have great levels of disposable income now as well.
George Osborne opened his budget address with some upbeat assessments of the British economy’s performance, stating the UK is on-course for a budget surplus. However, citing the Office of Budget Responsibility (OBR), he said the global economic outlook was materially weaker than expected. Nevertheless he expects the UK to grow “faster than any other advanced economy”. While it is prudent to take such ministerial optimism with a pinch of salt, the Chancellor’s strong-in-a-weak-global-environment synopsis is as good for the tyre industry as for anyone else.
Something that is potentially much more positive for the tyre business – especially at the retail end of things – is the Chancellor’s decision to increase personal tax allowances for most people. Indeed, the chancellor announced he is increasing personal income tax allowances by about 10 per cent to £11,500. He also raised the threshold at which people pay the 40 per cent tax rate from £42,385 to £45,000. Both moves take effect in April 2017. Osborne also introduced “Lifetime ISAs”, which see the government offer savers a 25 per cent bonus on what they save between now and the age of 60 beginning when the accounts go live in April 2017. Taken together, the measures suggest British citizens could end up with more disposable income to save, spend or both.
Small business tax cuts
George Osborne also announced that he is more than doubling small business rate relief by raising the basic rate threshold from £6,000 to £15,000 and the higher rate threshold from £18,000 to £51,000. As a result, 600,000 small businesses will pay no business rates at all from next year. People starting small businesses online or renting out their homes via sites like AirBnB will also be able to enjoy two £1000 tax allowances from April 2017.
Larger businesses will notice that commercial stamp duty is to be reformed following the success of the changes to residential duty last year. Rates will be reduced mainly for the benefit of small businesses, but stamp duty on the purchase of premises worth more than £150,000 and of large leases has been increased.
Fuel duty freeze continues
The March 2016 budget also sees the six-year long fuel duty freeze continue. George Osborne said the move would result in a £75 a year saving for the average driver and £250 for businesses.
The Petrol Retailers’ Association (PRA) welcomed the chancellor’s announcement: “The PRA has been lobbying government and the treasury on this – in particular outlining the potentially damaging effects on the economy and household budgets of even an inflation-linked rise, so it is good news to hear the Chancellor’s commitment.”
The Retail Motor Industry’s National Franchised Dealers Association (NFDA) also welcomed the budget: “Today’s budget announcement continues to encourage long term investment and help businesses. The government made clear their intention to ensure the UK economy remains on track
“The measures announced will help businesses allowing more money to be invested in growth and employment. We are encouraged to see the further reduction in corporation tax following previous announcements and also the changes to the administration around the rating regime,” said NFDA director, Sue Robinson.
Robinson also suggested that tax cuts and the fuel duty freeze in particular would give “consumers more money to invest and spend elsewhere” – something that is as good for the tyre business as it is for the automotive market.
Oh yes and beer and whiskey duty was frozen too! Truly a now-minded future budget.