How Will The Budget Affect Your Investments?

Published in Investing on 21 March 2012

Budget boosts for housebuilders, North Sea oil, media and tech firms.

Today's Budget did not contain any nasty surprises for most private investors; only those with high incomes and large pension contributions might be affected.

However, the Chancellor did announce a number of changes that might affect the fortunes of some industries and companies popular with Foolish investors.

Let's take a quick look at personal taxation first. Leaving aside the increase in the personal allowance (£9,205 from April 2013) and the cut from 50% to 45% in the top rate of income tax, what else changed?

Pension relief

Pension tax relief was not changed directly in the Budget, but the Chancellor did announce an overall cap on tax relief. Anyone claiming more than £50,000 of tax relief in total will have their tax relief capped at 25% of their income.

Capital gains and inheritance tax

There were no changes to capital gains tax (CGT) and inheritance tax (IHT) rules. The current CGT allowance of £10,600 per year will remain unchanged this year and will rise in line with CPI from April 2013.

Similarly, the IHT allowance will remain unchanged until April 2015, when it will rise in line with CPI.

Cheap credit for housebuilders?

The Chancellor confirmed that the Get Britain Building fund would be expanded to provide £20bn of loan guarantees from Barclays (LSE: BARC), Royal Bank of Scotland (LSE: RBS) and Lloyds TSB (LSE: LLOY), among others.

This news promoted an instant boost in housebuilders' share prices, with Bovis Homes (LSE: BVS) and Barratt Development (LSE: BDEV) both surging upwards by over 4%.

Aside from a cut in the top rate of income tax, bankers didn't get any bonuses. George Osborne announced an increase in the Bank Levy aimed at cancelling out the benefit from the forthcoming cuts to corporation tax.

Gas and oil boost

There was good news for North Sea oil companies, which were promised an end to "uncertainty" over decommissioning tax relief. Companies will now be able to get contractual agreements on the relief they will receive when decommissioning assets.

There was good news for companies opening up new fields for production, too. A £3bn field allowance will be available for deep fields with large reserves. This is aimed at the oil and gas fields west of Shetland, which are being developed by BP (LSE: BP) and Royal Dutch Shell (LSE: RDSB), among others.

Small oil and gas companies also got a boost. The allowance for small fields will be increased to £150m, with the maximum qualifying field size increasing to 6.25m tonnes and tapering to 7m tonnes. This should enable more fields to qualify.

A Budget for business?

Other potential beneficiaries of the Budget include the film, videogame and technology industries, all of which were promised tax incentives to encourage them to maintain and develop their presence in the UK.

Whatever your view on the politics of the Budget, it did include a variety of measures aimed at encouraging British industry.

Were you impressed by Osborne's efforts? Leave a comment below and let us know.

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LastChip 21 Mar 2012 , 4:56pm

A budget that indirectly taxes pensioners, is bad news and a very poor reflection on the politicians that sanctioned it.

Cutting the 50% tax rate, was a naive misjudgement. What makes the Chancellor think, those wealthy individuals will still not use all legal means to avoid paying tax? It doesn't matter whether it's 5% or 50%, it's a way of life to them and they have the resources to do it.

A big thing was made of the £2m+ stamp duty. In reality, how many transactions will that affect?

All in all, a pretty poor performance and one where they've collectively failed to get anything like the growth needed to climb our way out of debt. No radical ideas or even glimmers of ideas.

Gordon Brown was the undisputed champion of smoke and mirrors, but Mr Osborne isn't far behind. As always, it's not what they tell you, but what they don't!

To me, this reinforces what I've thought for the past few years. None of them have got a clue on how to actually get us out of this mess. What a refreshing change it would be, for them to admit it.

WelshMat 21 Mar 2012 , 5:12pm

Although I have a vested interest as I work in the industry, I am glad that we finally have a budget with some, all be it small, tax breaks for the videogames industry.

As I have have been in the industry since 2001 and watched the Blair/Brown government preside over a masive brain drain in the UK games industry as companies began setting up in Canada which hase major tax insentives. During the Brown/Blair years we went from having the 3rd largest games industry in the world with a few UK publishers to now being 5th or 6th and no UK owned publishers.

Vikingdon1 21 Mar 2012 , 5:22pm

The removal of age tax allowances must surely mean that those due to retire after say 2015 MUST make sure they save in ISA's and carefully monitor there future taxable pension income as their pension income will be taxed IN FULL after basic allowance with no regard to any age allowance.

theRealGrinch 21 Mar 2012 , 5:40pm

we are managed by the most ambitious but not smartest people (MPs) that have their judgement clouded in the westminster village as they swear allegiance to their political party first and the country last. unfortunately, they are all on the make and on the take.

LastChip 21 Mar 2012 , 7:47pm

I think theRealGrinch, you're being a little charitable suggesting we are managed; more like manipulated and not for our benefit ;-)

shinygoldcar 22 Mar 2012 , 10:29am

Corporation tax! The corporation tax cuts will benefit all companies paying UK corporation tax.

However, what I'd like to know is which companies will benefit least from this, as FTSE 100 and 250 companies will be paying a lot of taxes abroad anyway.

cduance 22 Mar 2012 , 3:15pm

I think that the Corporation Tax cuts will benefit small businesses which are technically the ones doing most of the hiring at the moment and I think that this is a very good move as it should reduce the tax they have to pay and hopefully encourage them to increase the number of people they employ as they prepare to grow. The government will earn from the additional employer side and employee taxes paid and at the same time give them money to spend into the economy which is what is needed more money flowing around the system as fast as possible.

TIMPERLY 22 Mar 2012 , 3:29pm

Pensioners- let's see

Income on investments slashed following the credit crunch
Reduction in winter fuel allowance from £250 - £200
Move from higher RPI to CPI for calculating pension increases despite the fact that pensioners suffer the highest rate of inflation
and now
Abolition of Age Allowance on the grounds that pensioners are confused by it

All in it together- I don't think so , Mr Osborne

midmay 23 Mar 2012 , 10:42am

As o=all our recent governments have stood by and watched the takeover of so many of our top companies which used to bring in lots of foreign exchange to help pay our way. These companies are now run from Switzerland or France Germany or even Spain and are now a major drain on our resources. The move to make the tax payer responsible for the Royal Mail pension fund is just another way of enabling another foreign company to buy the firm. The germans and the Dutch responded to the EU instruction to allow competition into thier postal systems as not being in their National interest and ignored the ruling. Yet once again our so called Politicians gave into the EU and there is n oreal competition and the individual citizen pays an extortinate price to have a letter delivered. It is time for Cammeroon and co to wise or else more people will be like me and vote UKIP.

tjparfitt 24 Mar 2012 , 9:04pm

The 50% so called 'top' rate of tax is a smoke screen. The real top rate of tax kicks is at £100k where the marginal rate is 62% (including NI) due to the loss of the personal allowance.

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