The Budget – what we picked out of it.

Here is our take on the recent announcements in the budget announced today:

Growth, Unemployment & Inflation
All are said to be better than elsewhere but low, however all are pretty shaky and open to getting worse if anything happens to shake the other assumptions that the ONS has given. Growth is up to 0.8% this year with no ‘technical recession’ could this be a boost to confidence. Unemployment will rise to 8.7% but then fall, meaning not as bad as some have expected and inflation will continue to fall. A warning though the that a further £10bn of cuts are needed in the next spending review on top of the £18bn done in the last spending review -that means more benefits are going in 2016/17.

The deficit will fall faster than in the November statement, public sector debt will be falling as a percent of GDP by the end of the parliament, this is better news, but still hardly what anyone would claim as good.

Interest Rates & Property
Re-told about business source funding announced over weekend, also extra funding to finance construction. Also there is talk about extra support for transport infrastructure especially in Northern England and an airport for SE England.

A tax break for Shetland’s oil program.

Stamp Duty
Well it turns out this is the goose that lays the golden egg, well it will be if we can get yet more Oligarchs to move here or hyperinflation strikes finally moving house prices up again and we end up with all First Time Buyers again paying this tax.

The new levels are as follows:
£2,000,000 – 7%, 15% if done through a corporate envelope

Also consultation on existing corporate envelopes about an annual charge. ‘Subsales’ route to be closed off. Also a basic statement  – you will pay

Council Tax
Nothing done, missed opportunity it could work as a progressive mansion tax, the nearer you are to owning a mansion the higher rate you pay. At the moment the cap is far too low.

Income Tax thresholds
Ok the 50% tax rate – it is temporary, so have the last 2 Chancellors, but not going while wage freeze for public sector. £16bn income was moved to save £1bn, self assessment are down £3.6bn. It has raised £1bn not £3bn.

The difference between a rate of 45p & 50p the loss is only £100M, so he has cut it from April next year.

Figures OBR backed.

Tax Allowance

This has been raised to £9205 (on the way to £10k aim) from next April 2013. £220 per year for people. People on minimum wage will be paying half the tax they once were.

With this you  might ask, what has this to do with mortgages? Well the significant move done by the coalition government over recent years means you can now earn a significant amount more each year before paying tax. A £9205 allowance removes nearly a further 600k people from tax entirely. This affects peoples affordability and lenders should look at this because at the moment they are lending very low multiples (I know it isn’t multiples anymore – but you need to use some form of comparison) to lower income people and these tax moves might help those people.

Tax and NI consultation is published next month

VAT loopholes to get closed with the basic exemptions e.g. Kids Clothes and Food remain.

Annual breakdown of government spending of people tax.

Company Tax
Small firms to get simpler tax returns

Corporation tax down 1% and will be only 22% at the end of this process (2 years)

The banks levy is again increased to counter this leaving them paying the same

Pensions & Benefits
The single level basic state pension is coming and estimated at £140pw
Current tax allowance for pensioners are frozen till allowances catch up with them.

Child benefit reduction for higher paid is being withdrawn, only when someone is more than £50k and gradual so all gone once £60k or more is earned by 1 person.

Duty etc
No change to alcohol
Tobacco inflation plus 5% = 37p on a pack of cigarettes
Fuel Duty – big claims on savings – no changes to current plans
Vehicle excise – no changes to current plans

This entry was posted in Mortgage Industry, Press Comment. Bookmark the permalink.