Kleinwort Benson reacts to the Budget

Jeremy Beckwith, Chief Investment Officer at leading UK and Channel Islands private bank and wealth management group, Kleinwort Benson, today comments on [1]what is likely to be Alistair Darling’s final Budget. "With a General Election around the corner this was a Budget of little economic significance, not only because it is likely to be superseded by a Summer Budget from the incoming government, but also because all of the announcements were (by Treasury standards) of very little significance.

Looking at the detail of the announcements and how some of the measures could affect investors, Jeremy Croysdill, Head of the acclaimed[2] Tax team at Kleinwort Benson reacts to some of the measures announced.

"With no changes made to the main rate of Capital Gains Tax at 18% this means the Tax is at an historically low level and the increase in Entrepreneur’s Relief to £2m will be welcomed by business owners. Equally the news that the Annual Investment Allowance will increase from £50,000 to £100,000 to help small businesses purchase new plant or machinery will also be well received.

"The announcement to freeze the Inheritance Tax nil rate band at £325,000 for the next four years was unexpected and, coupled with the impact of inflation, will result in a real increase in Inheritance Tax revenues. It is therefore even more pertinent to undertake a review of how this decision may affect individual estates.

 "The news that the ISA limit will be increased to £10,200 from 6 April 2010 will be well received as these have been a popular investment vehicle since they were introduced, offering as they do the opportunity to build up a substantial tax-free pot. With no changes to the rules for investors in EIS and VCTs this will continue to promote investment into small businesses and means that there is a range of investment opportunities available to make best use of tax reliefs while interest rates remain low."

"The government continues to crack down on tax avoidance by strengthening the Disclosure of Tax Avoidance Schemes regulations and with penalties of up to 200% of the tax for deliberate tax evasion, this underlines just how seriously the government views such activities.

"The decision to offer a relief on Stamp Duty Land Tax (SDLT) for properties up to £250,000 for first time buyers will undoubtedly stimulate the bottom of the property ladder. However, the fact that there will be a 5% SDLT charge on properties valued at more than £1m may scupper the upper end and more City-centric part of the property market."

Jeremy Beckwith concluded commenting that, "With a budget deficit of £167bn, a growth package of £2.5bn is almost an irrelevance and probably less than a rounding error in the overall scheme of things."

"The Budget was structured to be very political, contrasting Tory IHT cuts with funding for social care and help for first time buyers with higher taxation for £1m + homes.

"These budget deficit forecasts for future years appear to be based on wildly optimistic growth forecasts and totally undefined spending cutbacks. All in all a Budget that will be quickly ignored and forgotten."

- ENDS -

For media enquiries and to speak with Jeremy Beckwith or Jeremy Croysdill please contact:

Kleinwort Benson                    Rachel Butler              +44 (0) 20 3207 7239 

Phoenix Financial PR                Gordon Puckey          +44 (0) 20 7947 2856

                                             Karin Tyche                 +44 (0) 20 7947 2858

Notes to Editors:

About Kleinwort Benson

Kleinwort Benson is one of the most historic names in UK banking with roots dating back to the 1850s. Kleinwort Benson is the brand name of Kleinwort Benson Private Bank Limited (established in 1962 from the merger of Kleinwort Sons & Co and Robert Benson & Co) and its subsidiaries.  It operates from principal offices in London and the Channel Islands with regional offices in Birmingham, Cambridge, Edinburgh, Leeds Manchester, and Newbury.

Kleinwort Benson Private Bank Limited is authorised and regulated by the Financial Services Authority, registered number 119269 and is a member of the London Stock Exchange, APCIMS and the British Bankers Association. Kleinwort Benson Private Bank Limited is a company incorporated in England and Wales with company number 2056420 and VAT number 244733560. Registered Office 30 Gresham StreetLondonEC2V 7PG. Telephone +44 (0) 20 3207 7000. Telephone calls may be recorded.