A Budget for Growth?

When the government came to power just over two years ago, it was on the basis of stability and consistency with the aim of achieving growth. Today the new Chancellor stood up, with a new Prime Minister beside him, to present what was framed as a Budget for Working People and to help businesses small and large.

It was always going to be a challenging Budget given the general economic position, not only in the UK but across the world.

As we have become well used to, many of the announcements had already been trailed in the days leading up to today and therefore there were no major surprises. This can be seen as a positive, as what we all want is certainty and consistency so that plans can be made and given time to implement.

Headline measures that might be likely to impact businesses and business owners across the South West included:

1. With costs rising for all there was some good news, with an extension to the reduced VAT rate on electricity costs and a commitment to remove standing charges on gas bills and longer-term on electricity bills too, In one announcement that was not leaked beforehand, a £100 “household energy payment” will be made to all households in council tax bands A to D in England.
2. For businesses the good news was an increase in the small business rates threshold from £12,000 to £18,000 which is welcome news and will help exempt many small businesses from rates. However, the increase in the rate does effectively represent what the inflationary increase on the threshold would have been since it was frozen nearly 10 years ago.
3. However, for any capital intensive businesses the news was slightly less welcome. On the positive, full expensing has remained, which was committed to in the last budget; and first year allowances have increase from 40% to 50%. However, what will be a hit will be a further reduction in the main rate of allowances from 14% to 12%.
4. For business owners or those looking to sell assets, it was positive that Capital Gains Tax rates remained untouched, as there was speculation the Chancellor would increase them. However, the sting in the tail was the reduction in Business Assets Disposal Relief lifetime allowance from £1m to £500k. This would therefore increase the tax on a £1m sale by £30,000.
5. Offsetting this was a new Founders Relief Rate of 10% CGT on a £10m life time allowance. While positive, we wait to see how this would work, but it does feel like the older BADR allowance that was previously removed.
6. For landlords or those with interest income the bad news does keep coming it seems, with a further 2% rate increase to the rate from April 2027, above that already announced from April 2027.

Overall, while there are some positives this Budget feels underwhelming and is just pushing what are likely to be harder decisions into future years.

If anything it has the hallmarks of a Budget to give the government breathing space before it makes what could be difficult decisions to achieve its spending plans. It does not feel like a Budget to stimulate growth.