Rob Peers, Tax Partner at EY in Yorkshire, said: “The Chancellor resembled ‘Michelangelo’ as he re-sculpted the UK tax system, taxing dividends, proposing changes to pensions, adding a new tax on banks, cutting corporate tax rates and restricting interest relief on buy-to-let investments.
“The Chancellor went well beyond what many expected, spanning the whole tax regime, from non-domiciles to Vehicle Excise Duty. He may not have listened to Lord Lawson’s argument on abolishing the 45 per cent income tax rate, but he clearly wanted to emulate his reputation as a man of principle and principled reform.
“As expected, the Chancellor made changes to IHT and pensions tax relief that amount to “save less now, inherit more later”; today’s high earners won’t be able to save as much on a tax-free basis, but will be able to inherit the ancestral home and the remains of their parents’ pensions intact. People might spend money that would have gone into their pensions on subsidising retired parents to preserve their pension pots.
“There’s also a big question about whether these changes, which bring tax revenue forward, will create a revenue hole for a later government.
“While harmonising pensions and ISAs on the ISA model would simplify the tax regime it would mark another huge shift for savers, employers, the pensions industry and the future economy. If it goes through, he will receive a huge short-term windfall – unless consumers start saving less. But how much more change can savers take before they lose confidence in the system altogether? Can the industry and employers adapt when they are still reeling from the Chancellor’s 2014 changes?
“Perhaps most importantly, there could be a risk to the future economy. A generation who save through Pension ISAs will pay no further tax once they retire, while making ever increasing demands on the healthcare system. The tax revenue from their contributions will have been long spent. The scale of change contemplated is on a par with the Thatcher government’s reform of the housing market, so it is important that the government is going to consult through a Green Paper rather than just driving the change through.
“Despite the promise of an extra £8bn for the NHS to 2020, the huge challenge of savings will still be on the minds of NHS management.
“In the short-term, savings will be made through measures that are already being pushed, such as reducing hiring of temporary staff, but also through getting better value for money from buying hospital supplies. Many of these measure have been tried before and at best, will be mixed in terms of their impact. In the main, they will also fail to tackle the more fundamental issues set out in the NHS Five Year Forward View.
“We are now seeing many hospitals and wider health economies react by looking at how they can divert demand away from costly A&E, and towards other forms of care such as GPs. This will go a long way to meet the £22bn efficiency target, but more importantly should also give patients better quality of care and greater control over where they are treated.
“We live in a world where consumers demand convenience at all times and this forms part of a wider trend where consumers expect seamless flexibility across multiple channels. Retailers need to ensure that their opening hours are reflective of the changing demands from consumers so any move to extend opening hours on a Sunday will help retailers fulfil this need.
“However, this change will inevitably bring extra burden to retailers at a time when margins are already under significant pressure from the rise of discounters and online outlets.
“Businesses were left with mixed messages from today’s budget. The promise of cuts in corporation tax rate from 2017/18 was tempered by large business being the biggest funder of the Chancellors’ budget through the requirement to pay taxes 3 months earlier. This measure alone gave the Chancellor almost £4.5bn in 2017-18 and echoes the change that Gordon Brown introduced in his first Budget, back in 1997.
“On a positive note, this cash flow raid also allowed the Chancellor to fund the rise in the Annual Investment Allowance to £200,000.”
John Garbutt, Director at Harrogate-based DSC Chartered Accountants, said: “Given the pre-election announcements of no increases in the rates of income tax, VAT or national insurance, it was still a surprising budget.
“The big headline grabbing news for employees is the national living wage of £9 by 2020, which, along with an increase in the personal allowance threshold, will help many working people.
“The increase in inheritance tax to potentially £1m for some families will also be a welcome relief and very popular.
“There was plenty in the budget for business owners too. From the increase in the employment allowance to £3k which reduces the employers national insurance that is payable, to the reduction in corporation tax from 2017 to 19 per cent.
“The annual investment allowance has also been set at a much more sensible level of £200k so now would be a good time to plan your capital expenditure.
“On the other hand, the so called simplification of tax on dividends could mean that small business owners may end up paying tax at a higher rate.”
John Cridland, CBI Director-General, said: “This is a double edged Budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.
“Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.
“The further reduction in corporation tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7 per cent increase.
“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6 per cent .
“Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.”
Dr Anthony Lee, senior director at BNP Paribas Real Estate, said: “The government’s plans to reduce rents paid by tenants will have an adverse impact on both housing associations and developers.
“Social housing rents have – until now – increased annually by RPI plus 0.5 per cent per annum, underpinning housing associations’ business plans and making social housing an attractive investment proposition. This announcement is likely to undermine housing association finances and risks making bond issues less attractive.
“There is also likely to be an adverse impact on the viability of new developments. The rent reduction will reduce the amount housing associations can pay developers for the affordable housing element in their schemes.
“This will put pressure on viability and ultimately reduce the overall percentage that schemes can provide.”
Keith Emmerson who runs TaxAssist Accountants in York said: “The new compulsory living wage of £7.20 an hour from next year and £9 an hour by 2020 could impact on many small business, particularly at start-up stage, but this is offset by an increase in their Employment Allowance from £2,000 to £3,000 a year, which is welcome news. However, sole director companies are set to lose this benefit next year.
“At a time when many business owners are starting to consider vital investment for growth, setting the annual investment allowance at £200,000 will also be welcomed, as is the reduction in corporation tax to 19 per cent in 2017 and 18 per cent by 2020.
“Businesses which depend on cars and vans to deliver their products and services will also breathe a sigh of relief that fuel duty remains frozen.
“We will be working closely with our owner-managed company clients to look at the implications of new rules on tax free allowances for dividend payments.
“The Chancellor called this a Budget for working people and for local small business owners there were some welcome summer tax breaks, which will help many make vital decisions on recruitment and expansion. With small and medium sized firms in this country employing over 15 million people, support for this sector is crucial to the growth of the UK economy.”
Andy Gregory, regional director, North and North West at BGF, said: “We welcome the Chancellor’s focus on regional growth. We know from talking to small and mid-sized businesses across the North that confidence is up and that the landscape is ripe for growth.
“Empowering cities and regions to help businesses in key areas like skills, infrastructure and planning can help improve these conditions and further build on the progress of the Northern Powerhouse.”
Nathan Marsh, director in EY’s Government team in the North of England, said: “The Budget has signalled a clear statement of intent around the Government’s commitment to devolution.
“The £30m of funding for integrated transport is money that hasn’t been made available in previous Budgets but is now going to be ring-fenced and will form part of a wider funding path for infrastructure investment in the North of England.
“A key area of investment is the development of the ‘Oyster of the North’, which is designed to help drive mobility, a consistent customer experience and create the conditions for economic growth across the North.”
Glynis Frew, managing director of Hunters Property Group, said: “We welcome the Chancellor’s new inheritance tax thresholds, the last election taught us that home ownership is very important to the nation and when people have worked hard to own a residence and have already paid taxes they should be able to pass this onto their children tax-free.
“Despite a phased approach, we were disappointed to hear of the reduction in tax breaks for buy to let investors as this will discourage new landlords from entering the sector and will result in a lack of stock. This will inevitably lead to higher rents as at the end of the day landlords are business people and will need to compensate for this.”