VAT to 20%, CGT to 28%
While many of the measures announced by Chancellor George Osborne in his Emergency Budget today appear to be broadly in line with expectations, the increase in Capital Gains Tax at midnight tonight to 28% from 18% for higher-rate taxpayers is of key interest to those in the property sector. Speculation ahead of the Budget had suggested CGT might rise to as much as 40% or even 50% to bring it into line with the top rate of income tax.
The rise in VAT to 20% from January, although well flagged, will clearly have an impact on retail performance, in a sector that is already struggling in many regions of the UK. Rents on retail properties have continued to fall this year across much of the country, with central London and a few key South-east centres the only exceptions. Although there may be a rush to buy big-ticket items ahead of the January increase, the news today will hardly gladden the hearts of those in retail.
Osborne said corporation tax would be cut by 1 percentage point a year for the next four years, taking it to 27% next year and 24% in four years’ time. The rate for small businesses is to be cut to 20%.
In remarks of interest to the construction industry in particular, Osborne said there would be no further cuts in capital spending. He also announced the setting-up of a regional growth fund to finance projects over the next two years. Projects that have been approved to go ahead include the upgrade of the Tyne and Wear metro, extension of the metro in Manchester, redevelopment of Birmingham New Street station, improvements to the railway routes to Sheffield and the rail link between Liverpool and Leeds.
The commentators are hard at work preparing their responses to the overall package of measures in this austerity Budget – the phrase “eye-watering” seems to be most frequently in evidence among the instant reactions. What do you think? Your thoughts are welcome.
* Segro has today completed the sale of a further £237.5m of assets to its Airport Property Partnership with Aviva in a deal flagged in April. The partnership now has £684m of assets around the Heathrow area.
