The Chancellor should introduce measures targeted at encouraging investment and long term saving in Wednesday’s Budget, say advisers.
Chancellor George Osborne has said there will be no further tax increases or spending cuts announced on Wednesday and advisers believe it is vital positive messages like this keep coming.
Worldwide Financial Planning IFA Nick McBreen says: “The individual taxpayer has taken a pasting. We need positive messages which tell people it is sensible, tax efficient and productive to save and invest in the market. If people batten down the hatches in reaction to the Budget it will be disastrous.”
Earlier this month, the Office of Tax Simplification called for a review of Capital Gains Tax. Derbyshire Booth Management managing director Greg Heath wants a return to a tapered system which takes account of how long people hold assets.
He says: “I prefer the old system where the longer you hold on to the asset, the lower the tax. It would stimulate savings.”
Anand Associates managing director Bhupinder Anand has written to Osborne asking him to consider the reintroduction of a corporate version of the Enterprise Investment Scheme. The Corporate Venturing scheme was introduced under Labour but was not renewed when its ten year life span expired.
He says: “CVS allowed firms to invest in new businesses and get 20 per cent tax relief. EIS only targets personal money and we used to do a lot of business with CVS.”
The income tax relief for EIS is currently 20 per cent and Anand says he want to see it rise to 30 per cent. In a recent speech, George Osborne hinted that further measures may be introduced to encourage the EIS, although he raised concerns about VCTs. Anand warns against reducing VCT reliefs, instead suggesting that they should also be increased.
He says: “At the moment they want it both ways taxing at a higher rate but relieving at a lower rate, so there should be some consistency.”
Heath says he wants to see more done to help small firms like his expand and that reductions in corporation tax or more apprenticeships being made available would help him overcome nervousness about the market.
He says: “We have been looking to expand but you have to be cautious with the market as it is, so some encouragement there would be good.”
The OTS’ review into tax simplification called for the Government to consider merging National Insurance and income tax as a long term objective saying it would result in a “considerable simplification”.
Bloomsbury Financial Planning certified financial planner Robert Lockie says: “It is an excellent idea although politically risky as it would involve apparently raising the level of income tax and some could make considerable political capital out of that.”