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Budget 2012: A taxing Budget

Such was the extent of the leaks to the media before the Budget the joke going around was that chancellor George Osborne was reviewing the newspapers rather than delivering the Budget at 12.30pm today.

Almost everything was pre-announced or leaked to the press leaving the Budget itself with a predictable feel and no surprises.

But the predictability doesn’t mean there was nothing of significance as there were some major changes to Britain’s tax regime.

Notably the 50p top rate of income tax on salaries of more than £150,000 will be replaced with a 45p rate from April 2013.

Labour leader Ed Miliband branded the tax cut a bonus to bankers for the government and taunted the government front bench by asking them if they would benefit from the change.

Corporation tax will be chopped by 2p from 26% to 24% in a fortnight and it will also drop by 1% for each of the next two years.

As Osborne was keen to point out this rate would compare extremely favourably with other countries such as the United States at 40% and Japan on 30%.

Osborne believes the low rate will attract businesses to Britain although it will still be almost double Ireland’s ultra-low 12.5% corporation tax rate.

To prevent any suspicion that he was giving the banks a tax cut Osborne announced that the bank levy would be raise yet again to 0.105%.

Angela Knight, chief executive of the British Bankers’ Association, recently told me the only reason the government varies the rate is to ensure they raise the £2.5bn it has planned to.

It is politically useful though for Osborne to portray this as a further tax on the banks that are so despised by the public.

With the banks bashed and businesses given a tax cut Osborne moved on to property and left the industry with plenty to mull over.

Stamp Duty on homes above £2m has been increased for individuals to 7%, up from 5%, to pay for the 50p income tax cut.

Richard Sexton, business development director at e.surv, says it won’t be a policy that hits the housing market with any real force.

He says: “An extra £40,000 of Stamp Duty tax is an annoying inconvenience for wealthier buyers, rather than a serious repellent.

“The effect on the overall housing market will be nominal given how few people the tax effects. Less than 1% of all house purchase approvals in 2011 were for properties worth over £2m, so the effects are unlikely to be widely felt and won’t feed down into the lower echelons of the housing market.”

Corporate purchases will pay 15% Stamp Duty on properties over £2m after widespread tax avoidance on homes bought through limited companies.

This will have some impact on high net worth clients particulalry in the bridging sector which facilitates expensive purchases on central London property.

Even more galling is that the changes come into force today so for anyone mid-transaction the new 15% rate is exteremely punitive.

The homebuilder fund will be expanded further in yet another attempt to boost Britain’s house building.

Before Christmas the figure was £400m and we can now expect that to increase to an unspecified higher level.

Brian Murphy, head of lending at the Mortgage Advice Bureau, says: “The promise of extra funding to help construction firms building new homes will work alongside the NewBuy scheme and will benefit not just first-time buyers.”

There was no last minute reprieve for first-time buyers with an extension of the Stamp Duty holiday despite loud calls from the Council of Mortgage Lenders and others, which will now expire later this week on March 24.

The NewBuy scheme was mentioned along with the re-juvenated Right to Buy scheme and it seems that will be the housing market’s lot for the time being.

Then again we already knew that this morning after reading the newspapers over the last week.

 

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