Budget 2018: good for London?

While an increase in the personal allowance and higher rate income tax threshold will be good news for London, together with a boost to house building in the east, there was no news on pollution, public transport and policing, writes Paul Gallagher, tax partner at EY.

December 2018

A significant increase in the Annual Investment Allowance to encourage capital investment by businesses aims to stimulate economic growth across the country. Changes to intangible fixed assets regime could have a significant impact on groups and improve the international competitiveness of the UK as a location to hold and exploit intellectual property. With much of business investment being in London this is a welcome measure for business and growth.

There is an extension of the British Business Bank’s Start-Up Loans Programme to 2021 to continue the provision of loans and mentoring to entrepreneurs and small businesses. With 40% of tech sector start-ups being in the London, this continued investment will encourage growth in the capital.

Small businesses are also being assisted by the announced reduction in business rates for properties with rateable value below £51,000. However, with the average rateable value in the capital being significantly above this, it remains to be seen how much this will benefit London.

The increase in the personal allowance threshold to £12,500 and the higher rate income tax threshold to £50,000 will have the biggest impact on Londoners where the average salary is the highest in the country.

Items specific to London include £291m from the Housing Infrastructure Fund for 18,000 new homes in east London, though some argue this is still too short of the 66,000 homes required per year. There was also continued support of HS2 enabling business growth in both London, the Midlands and the North.

As a central finance hub for Europe, London will likely be impacted by the outcome of Brexit. In our pre-Budget survey, 49% highlighted Brexit uncertainty as the biggest threat to UK competitiveness/ investment so the £500m of additional funding allocated to Brexit preparations may help to allay these concerns.

Overall it was a good Budget for London business but was quiet on matters of pollution, public transport and policing – could it have done more for the people of London?

Paul Gallagher is a tax partner at EY.

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