By Marcus Leach
As the dust begins to settle on the 2012 Budget announcement the attention now turns to analysing the measures outlined by Chancellor Osborne.
The Institute of Directors have highlighted what they believe to be the five key points to come from the Budget.
Corporation tax reduced to 24 per cent from April 2012
“The reduction of Corporation Tax faster than planned is a positive step in the right direction, which we have long called for," Simon Walker, Director General of the Institute of Directors, said.
"Britain urgently needs to become a competitive, low tax economy, so the Chancellor must not deviate from this path. It will take time and serious action to rebuild this country’s reputation as a place which welcomes business, and reducing Corporation Tax year-on-year helps that process. We should be aiming for a Corporation Tax rate of 15% by 2020 — that would put Britain in a very strong position.”
Reduction of the top rate of income tax from 50p to 45p
“The Chancellor has not gone far enough or fast enough on income tax. 50p was hugely damaging, but at 45p we are still uncompetitive," Walker said.
"Even after the reduction two-thirds of the OECD will still have a lower top rate. This fudge will do little to combat the impression that Britain is a high-tax country, where ambition is not welcome.”
Failure to address the anomaly of 62% tax on £100,000 - £116,000
Less well-known than the 50% income tax rate is the anomaly that due to the phasing out of the personal allowance for those on incomes between £100,000 and £116,000, earners in that bracket face an effective rate of tax on income of 62%.
“This anomaly is unjust and absurd, so we are very disappointed that George Osborne has left it in place," Walker said in response to the failure to remove the anomaly.
"As a result, directors of many medium-sized businesses, as well as many head teachers and public sector managers will be left paying a higher tax rate than others who earn far more. This is an outrageous, effort-sapping distortion in our tax system, and there is no conceivable excuse for keeping it.”
Good news on state and private pensions
“This budget brings three items of good news for pensions. Our members will congratulate the Chancellor for resisting the temptation to limit further tax relief on pension contributions. We need as few changes as possible in pensions ahead of the automatic enrolment initiative starting later this year," said Walker.
“The signal that state retirement ages will be raised again shows the Government is starting to deal with the reality that we are all living much longer. Demographic changes cannot be denied, and George Osborne is rightly addressing this.
“The best news was the confirmation that a move to a flat-rate state pension will proceed. Many had started to worry that this was being blocked by the Treasury, so to hear from the Chancellor himself that it is to go ahead is good news indeed.”
New Youth Enterprise Loans pilot scheme
The Chancellor announced a pilot scheme for the new Youth Enterprise Loans programme, an initiative supported by the IoD which will provide start-up funding as well as business mentoring to young entrepreneurs.
“I am delighted that the Government have announced a pilot of the Youth Enterprise Loan scheme," Walker said.
"Over the last few months we’ve been part of the working group helping to deliver this, and I feel sure it will encourage many young entrepreneurs to establish new businesses.
"This scheme will provide young business-people with a fantastic launch pad, combining an initial cash injection with the know-how and advice to put the funding to good use. There are large numbers of young people out there with great business ideas, and we look forward to helping them turn their ambitions into reality.”
Join us on