The Chancellors sixth and final pre-election budget reflects the government’s claims that Britain is now in a time of progress. We have moved from austerity to prosperity, George Osborne described Britain as “walking tall”, “working again” and as the “comeback country”, he highlighted a reduction in the deficit and rise in jobs and overall living standards.
Budget highlights included legislation surrounding; income tax, pensions, capital gains tax, investments, ISA’S and inheritance. The ongoing battle against tax avoidance continues to play a key part and will do in any future government’s deficit reduction plans.
For small and medium-sized businesses, key announcements included an increase in UK Trade and Investment’s resources to double the support for British exporters to China, the scrapping of the annual tax return and class 2 national insurance contributions for the self-employed, and a rise in the national minimum wage to £6.70 this autumn.
Simon Walker, director general of the Institute of Directors comments “Whilst some may have expected more rabbits from the hat, today’s employment figures and the revised OBR [Office for Budget Responsibility] growth forecasts prove there’s definitely something of the Duracell bunny to Britain’s economic recovery. This is a testament to this government’s support for enterprise but, more importantly, it is evidence of the tenacity and resilience of UK businesses….”
The future of the Chancellors plans of course all remain speculative until after 7th May 2015. Time will tell what ideas will take effect from this pre election budget and if we can continue to “walk tall” but we can certainly speculate while we all wait for a post May 2015 Britain.
Budget Summary 2015
The state of the economy
- UK grew 2.6% in 2014, faster than any other advanced economy lower than 3% predicted
- 2.5% growth forecast in 2015, up from 2.4% predicted in December, followed by 2.3%, 2.3%, 2.3% and 2.4% in the next four years
- Record employment in the UK, with jobless rate to fall to 5.3% this year
- Trade deficit figures “the best for 15 years”
- Living standards “higher” than May 2010. Households better off by average of £900 in last five years
- Inflation projected to fall to 0.2% in 2015
- Deficit halved since 2010 as a share of national income
- Borrowing set to fall from £97.5bn in 2013-14 to £90.2bn in 2014-15, £75.3bn in 2015-6, £39.4bn in 2016-7, £12.8bn in 2017-8 before reaching a £5.2bn surplus in 2018-9
- Debt as a share of GDP to fall from 80.4% in 2014 to 80.2% in 2015-16 before falling in every year, reaching 71.6% in 2019-20
- Additional £30bn savings needed in next Parliament
- Public spending squeeze to end a year earlier than planned in 2019-2020, with spending from then to grow in line with total economic growth
- Welfare bills set to be an average of £3bn lower each year than predicted in December, and interest charges on government gilts £35bn lower
- Sale of £13bn Northern Rock and Bradford & Bingley mortgage assets
- The lifetime allowance for pension savings that can be accumulated free of tax will be cut from £1.25m to £1m from April 2016, saving £600m annually
- Pensioners will be able to trade in their annuities for cash pots, with the 55% tax charge abolished and tax applied at the marginal rate
- Widows of police officers firefighters who choose to marry again will have existing pensions protected
Alcohol, tobacco and gambling and fuel
- Beer duty cut by 1p a pint and cider by 2p. 2% cut in excise duty on scotch whisky and other spirits while wine duty frozen
- No changes to tobacco and gambling taxes, with tobacco duties set to rise by 2% above inflation, equivalent to 16p on a packet of 20 cigarettes.
- New “horse racing betting right” to replace the 50-year old horserace betting levy on British bookmakers
- Petrol duty frozen – September’s planned increase cancelled
- Tax-free personal allowance rise from £10,600 in 2015-6 to £10,800 in 2016-7 and £11,000 in 2017-8
- The threshold at which people start paying 40p income tax to rise by above inflation from £42,385 in 2014-5 to £43,300 in 2017-8
- Annual paper tax returns to be abolished, replaced by digital accounts.
- Transferable tax allowance for married couples to rise to £1,100
- Class two national insurance contributions for self-employed to be abolished in next Parliament
- Review of inheritance tax avoidance through “deeds of variation”
- New personal savings allowance – first £1,000 interest on savings income to be tax-free for basic rate taxpayers and £500 allowance for 40p tax ratepayers.
- Annual savings limit for ISAs increased to £15,240
- “Fully flexible” ISA will allow savers to withdraw money and put it back later in the year without losing any of their tax-free allowance
- “Help to Buy” ISA first-time buyers – allow government to top up £50 every £200 saved for a deposit
- A further £75m from Libor fines to go to charities for regiments which fought in Afghanistan and government to contribute towards permanent memorial to those who died in Afghanistan and Iraq and help renovate Battle of Britain memorials
- £25m to support army veterans, including nuclear test veterans
- Tax on “diverted profits” to come into effect next month, aimed at multinational firms moving profits “artificially offshore”
- Annual bank levy to rise to 0.21%, raising an extra £900m. Banks to be barred from deducting compensation for mis-selling from corporation tax
- Supplementary charge on North Sea oil producers to be cut from 30% to 20% while petroleum revenue tax to fall from 50% to 35%. New tax allowance to encourage investment in North Sea
- Review of business rates
- Automatic gift aid limit for charities to be extended to £8,000
- Farmers allowed to average incomes for tax purposes over five years
- New tax credit for orchestras and consultation on tax relief for local newspapers
Health and education
- Consultation on proposal to offer loans of up to £25,000 for UK students studying for PhDs and research-based master’s degrees.
- Mental health services to get £1.25bn in extra funding
- £15m church repair roof fund to be trebled
- Up to £600m to clear new spectrum bands for auction to improve mobile networks: commitment to deliver ultra-fast broadband to all homes
- New powers for Mayor of London over skills and planning
- Greater Manchester councils to be allowed to keep 100% of growth in business rates
- New inter-city rail franchise for south west of England