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May 14, 2021
As the ‘pre-election’ Budget approaches, political parties have been keen to start setting out their plans for the UK economy. With the Office for National Statistics reporting that inflation has reached a 15-year low, Chancellor George Osborne endeavoured to quash concerns over the possible impact of deflation, and sought to highlight Conservative plans to use a predicted budget surplus to cut taxes in the next Parliament.
Meanwhile, Finance Secretary John Swinney confirmed a series of changes to the proposed rates of stamp duty on residential property in Scotland, following the overhaul of the UK system introduced by the Chancellor in the 2014 Autumn Statement. The newly revised rates are set to take effect in Scotland on 1 April 2015.
Inflation fell to 0.5% in December, representing a 15-year low, the Office for National Statistics confirmed. The Consumer Price Index (CPI) grew by 0.5% in the year to December 2014, compared with 1% in November. This sharp drop has been attributed partly to falling fuel prices.
The news sparked concerns among economists and some business groups regarding the potentially damaging effects of deflation, including an outright drop in prices.
However, Chancellor George Osborne insisted that the latest fall in inflation is ‘welcome news’ for families and a recovering economy, and sought to distinguish the situation in the UK from the problems with deflation currently being experienced in the eurozone.
Bank of England governor Mark Carney sought to offer reassurance on the economic implications, arguing that keeping interest rates at record lows could help to mitigate low inflation.
The Chancellor also announced plans to use a predicted budget surplus to cut taxes, should the Conservative party win the next election. Chief Whip Michael Gove has previously claimed that a Conservative Government could eliminate the budget deficit by 2018 and have a surplus by 2020.
Meanwhile, a separate report has suggested that CPI should be abandoned as the UK’s main measure of inflation.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), was commissioned to review inflation data for the UK Statistics Authority. He highlighted the fact that there are currently four separate indices of inflation in the UK, a situation which he said is ‘causing confusion’, and argued that there is a ‘strong case’ for CPI to be replaced by CPIH as the main measure of inflation, which would take into account housing and living costs faced by homeowners in the UK.
The report also recommends that the Retail Prices Index (RPI) should be abandoned as soon as possible, arguing that taxes, benefits and regulated prices should not be linked to the RPI. However, the RPI is still applied in some key areas, including rail fares, index-linked Government bonds and some pensions.
The UK Statistics Authority is set to launch a consultation on the findings of the report.
Scotland’s Finance Secretary John Swinney has announced changes to the proposed new rates of stamp duty on residential property in Scotland, following a review of the system.
The Scottish property tax system is set to change significantly from 1 April 2015, with the introduction of a new Land and Buildings Transaction Tax (LBTT), which will replace the existing UK system in Scotland.
However, following the overhaul of stamp duty announced by Chancellor George Osborne in the 2014 Autumn Statement, which saw the introduction of a new graduated system, Mr Swinney announced that he would need to review the planned rates and bands for Scotland.
Previously, the threshold at which duty becomes payable in Scotland was to be set at £135,000 with effect from 1 April. Rates were to range from a starting point of 2% up to 12% on the portion of any property costing more than £1m.
Following the review, the starting point for stamp duty in Scotland has now been raised to £145,000, while a 12% marginal rate will apply to properties costing more than £750,000, rather than £1m.
Commenting on the decision, Mr Swinney said, ‘This Government has put fairness, equity and the ability to pay at the very heart of the decisions that we have taken’.
However, MSP Jackie Baillie described the move as ‘the fastest U-turn in history’.
Chancellor George Osborne warned that the new powers being granted to Scotland could result in a UK-wide ‘tax competition’.
£100 penalty if 2014 Tax Return not yet filed online. Additional penalties may apply for further delay. Interest starts to accrue on 2013/14 tax not yet paid.
Submission date of P46 (Car) for quarter to 5 January.
Last date (for practical purposes) to request NIC deferment for 2014/15.
‘We should start from the proposition that it is people’s money not government’s money and we should leave them with as much to spend as we can rather than frittering it away on wasteful government projects.’
Prime Minister David Cameron discussing Conservative party plans for tax cuts
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