What will be in the Chancellor's box for York and North Yorkshire?

Wednesday will see Chancellor Alistair Darling’s 1st Budget and it will be the usual mixture of measures already announced and surprises.  However, he is strapped for cash, with tax receipts falling, so expect there to be little good news, except for some small tax giveaways.

Tax rates and allowances have been set out ahead and the big losers are likely to be those who earn less than £18,500 (unless there is a hike in tax credits).  This is because there is going to be a doubling in the basic tax rate for them, from 10% to 20%.  Those over 65 will see a large rise in their personal allowances, to compensate.  Higher earners will benefit from the 2% fall in the basic rate, but will the Chancellor resist increasing the NIC surcharge from 1% to 2%?

No doubt he will be keen to flaunt some ‘green tax’ credentials by increasing road tax for gas-guzzlers and, possibly, impose a flat tax on showroom sales of up to £2,000 per vehicle.  This might be balanced by help for those low earners who pay high energy bills through prepaid meters.

A source of extra cash for the Chancellor could be higher duties on strong alcoholic drinks and there is a chance that he might restrict the tax relief for pension contributions to the basic rate.

Already announced is the doubling up of inheritance tax reliefs for married couples and look out for extra here, as the Conservatives have voiced their intention to increase them substantially.

Local businesses will see many changes implemented, including the abolition of industrial buildings and agricultural buildings allowances.  Capital gains tax for individuals and trusts is set to change hugely, with business owners seeing a tax rise from 10% to 18%.  This will be mitigated in a restricted way by the new Entrepreneurs’ Relief but the jury is still out on how useful that will be.

There may be a new system of advance clearances for business taxes, which would be very welcome.  There is also hope that the proposals to tax higher earners on the income of their spouses will be reviewed.

Tax rates for companies are falling for the really large concerns but the majority of local businesses will see a 1% rise, due to be repeated next year.  There are calls for this tax burden to be eased.

Business rates are being imposed on empty properties and other changes in the reliefs for capital expenditure will have a big impact, producing more winners and losers – those in the Science Park will be watching this closely.

The region strives to attract inward investment but the review of Residence and Domicile may affect this, as offshore investors may be put off by the personal charges proposed and also by the uncertainty caused by the likely attack on the overseas profits of UK-based businesses, which are threatening to tarnish the UK’s reputation for being a good base for multi-national firms and so affect job prospects.  There are calls for more consultation and a deferral until 2009.

Finally, road hauliers, other businesses and commuters will be watching out for a suspension of rate increases for fuel duty, together with further support for Biofuels.