Britain’s Osborne offers tax help in budget

Osborne announces upgrades to official forecasts for country’s economic growth but said he would stick to his belt-tightening plans.

British finance minister George Osborne on Wednesday promised tax relief for households, a cap on welfare, help for savers and manufacturers, and lower costs for bingo and beer as the government prepares for next year’s elections.

UK clamps down further on property purchases made through firms Britain on Wednesday expanded the pool of residential properties eligible for higher taxes if bought through a company, an attempt to allay voter concern that deep-pocketed foreign buyers are using firms to compete with locals to buy homes. Finance Minister George Osborne said that Britain would increase stamp duty to 15 per cent on company purchases of residential properties worth more than 500,000 pounds ($828,700). In 2012, Britain introduced stamp duty of up to 15 per cent for purchases of more than 2 million pounds through a company. “We are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company,” Osborne said in his annual budget speech to parliament . “From midnight tonight, anyone purchasing residential property worth over half a million pounds through a corporate envelope will be required to pay 15 per cent stamp duty.” Buyers who are purchasing the property to be rented out would however not be affected by this change, he said. An annual charge levied on properties worth over 2 million pounds would also be extended to those worth over 500,000 pounds, though its introduction will be staggered over the next two years to avoid burdening genuine rental and development companies, the Treasury said. “The government is extending it now clearly to ordinary overseas people who are buying properties...Clearly he wants to free up those houses for people based in the UK,” said Ros Rowe, head of property tax at PricewaterhouseCoopers. “He’s done a hit at the top, mansion level which is all about stamp duty avoidance, and this is about changing behaviour.”

In an annual budget statement, Osborne announced upgrades to official forecasts for country’s economic growth but said he would stick to his belt-tightening plans.

His help to savers, who have been hurt by near-zero interest rates, included freeing up pension rules.

But he sent shares in gambling firms tumbling with a new tax.

“With the help of the British people we’re turning our country around,” Osborne said. “We’re building a resilient economy.”

Britain goes to the polls in May 2015 and the annual budget plan is one of the government’s last opportunities to make a difference to how people feel about their finances before then.

Osborne hopes the improving economy and his focus on austerity will be a trump card in the fight against the opposition Labour party, which remains a few percentage points in polls ahead of the Conservatives.

But, in a surprise, Osborne increased the threshold at which British earners pay a tax rate of 40 per cent for the first time since the 2010 elections, something lawmakers in his Conservative party had been demanding. He also announced the latest in a series of increases in the amount of money people can earn before paying income tax.

The new forecasts, meanwhile, painted a picture of solid economic recovery. The economy is now set to grow 2.7 per cent this year, according to the government’s budget watchdog.

That was higher than a forecast of 2.4 per cent made as recently as December and much higher than an estimate of 1.8 per cent a year ago, when Britain was still struggling to shrug off the after-effects of the global financial crisis.

“That’s the biggest upward revision to growth between budgets for at least 30 years,” Osborne said to cheers from members of his Conservative Party.

Growth in 2015, Osborne said, was expected to be 2.3 per cent, up slightly from December’s forecast for 2.2 per cent.

The Office for Budget Responsibility’s forecasts for Britain’s economy, while higher than in December, are less optimistic than many others. The Bank of England expects growth of 3.4 per cent this year, which would make Britain one of the developed world’s top performers.

Despite the improved outlook, which shaved the official forecasts for Britain’s budget deficits in the next few years and meant debt was likely to peak a bit lower than previously thought, Osborne said he was sticking closely to his decade-long plan to fix the public finances.

“I have never shied away from telling the British people about the difficult decisions we face. And just because things are getting better, I don’t intend to do so today,” he said in his budget speech.

To help keep Britain on track with its plan to get rid of the budget deficit by the 2018/19 fiscal year, Osborne said the government will cap the amount of money it spends each year on welfare at 119 billion pounds ($197 billion) in the 2015/16 fiscal year.

Labour leader Ed Miliband slammed Osborne’s budget as not doing enough for ordinary people.

“Whose recovery is it under the Tories (Conservatives)? Under them, it is a recovery for the few not the many,” he said. “We know what their long term plan is, tax cuts for the richest whilst everyone else gets squeezed.”