Tough but fair Budget ends uncertainty for business

For Chancellor George Osborne, juggling the financial, economic and political requirements of this emergency Budget was never going to be an easy task, given the overriding objective of cutting the structural budget deficit to zero over the next six years. The question is, did he manage to pull the rabbit out of the hat?

“Tough but fair, painful but unavoidable” is the conclusion reached by many commentators, from a Budget which marked a "dramatic change" in political and economic strategy from its Labour predecessor.

From a business perspective, the end to speculation as to the scale of tax hikes (and in some cases falls) marks the end of a period of not insignificant uncertainty. While spending and deficit reductions were essential and inevitable, the economy was also looking for measures that would help them accelerate growth to move the UK out of the recession.

In particular the Chancellor's commitment to providing greater certainty on UK corporation tax, to sustaining capital spending and protecting investment projects sends out a clear message that Britain is once again open for business.

Following months of second guessing, the chancellor confirmed that the main rate of corporation tax will go down from 28% to 24% over four years, coming down by 1% each year. The small companies’ rate will follow a similar path to reach 20%.

Osborne also announced that the cuts would be funded by reductions to the main and special rates of capital allowances from April 2012. The annual investment allowance, increased to £100,000 by former chancellor Alistair Darling in his March Budget, will be cut back to £25,000 "to focus on investment for smaller firms", Osborne said.

One of the biggest surprises in the Budget, and one that certainly succeeded in confounding tax experts, was the move to increase the rate of Capital Gains Tax [ from 18% to 28% for higher and additional rate taxpayers from midnight on 22 June. Against a widely tipped hike to 40% or even 50%, the announcement marks something of a soft landing, particularly in the light of an increased the lifetime limit for gains which attract Entrepreneurs' Relief from the current £2m to £5m,

Needless to say, we have all the detail on Finance Week, with additional analysis on our sister sites, in particular AccountingWEB, including the detail that didn’t make it into the main event. Enjoy the read.