The chancellor increased VAT to 20pc in his emergency budget today, but lower levels of corporation tax and no change in the fuel duty should boost firms in the construction sector.
Corporation tax will fall 1 per cent for each of the next four years, but the VAT increase will also affect construction companies’ cashflows.
Fuel duty was left unchanged. The rate will be reviewed in the autumn spending review.
In a help to entrepeneurs, the budget increased the lifetime capital gains limit from its current rate of £2m to £5m. While the limit increased, the rate at which gains are charged has remained unchanged at 10 per cent for businesses. The rate has gone up for individuals.
Industry associations commenting after the Budget were critical of the VAT moves.
Director General of the FMB Richard Diment said: “Cash strapped homeowners will be more likely to resort to ‘cash-in-hand’ traders in order to avoid adding 20 percent to the cost of keeping their home in good condition.”
“This in turn will leave homeowners more vulnerable to being ripped off or having sub-standard work done on their home. Every year over £170 million is stolen from unsuspecting homeowners by rogue traders and today’s VAT increase will be a further incentive for this figure to escalate.”
Council for Mortgage Lenders director general Michael Coogan said: “We knew today’s Budget would be hard-hitting across the piece, so it is no surprise that housing has not escaped.”
“in the short term pain is likely, as the effect of tax rises on household finances dampens the already fragile recovery in house-buyers’ confidence, housebuilding is affected, and support for housing costs across all tenures is curtailed.”