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March 11, 2016

IoD calls for "spoonful of sugar" in Budget

IoD calls for "spoonful of sugar" in BudgetThe Institute of Directors says businesses are having to swallow a lot of "bitter medicine" at the moment and it is asking George Osborne to provide "a spoonful of sugar" in next week's Budget statement.

Simon Walker, director general of the Institute of Directors (IoD), has expressed concerns about the impact of new legislation on UK businesses.

Citing the introduction of the National Living Wage (NLW), the Apprenticeship Levy and auto-enrolment workplace pensions, Walker said: "The Chancellor's medicine will certainly taste bitter for businesses but we are far from convinced it will produce the desired result."

Businesses need "a spoonful of sugar to help them swallow the extra costs in terms of taxes and regulations", said Walker. "To make it more palatable, George Osborne must take the opportunity offered by the Budget to reverse the cut in investment incentives, reduce tax on middle earners and get rid of the absurd kink in the tax system, which sees tax on income shoot up to 62% at £100,000."

In order to soften the blow on businesses at the Budget, the IoD is calling for:

  • The Annual Investment Allowance to be returned to £500,000, after being cut to £200,000 at last year's July Budget. Only 3% of IoD members say AIA at this level is enough to make them increase investment, against 20% who say the cut is making them reduce investment.
  • The threshold for the 40p income tax rate to be raised by at least £2,000 this year, with a view to reaching £50,000 by 2019/20.
  • A smoothing of the tapering rate at which the personal allowance is removed above £100,000. Currently, for every additional £2 earned above this amount, £1 of the tax-free personal allowance is removed, resulting in marginal tax rates in excess of 60%.

And, in common with other business groups, the IoD is also calling for radical simplification of the tax system.

"Beyond the need to lessen some of the immediate pain, the Chancellor should also take this chance to begin genuine and bold simplification of the UK's tortuously complex tax system," said Walker. "This will be no simple task, so if he cares about leaving the tax system in a better condition than he found it, he must start now."

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