George Osborne has presented his Summer Budget to Parliament, the first for a majority Conservative government since November 1996.
“This is a Budget that puts security first, that recognises the hard work and sacrifice of the British people over the last five years, and says we will not put that at risk. This will be a Budget for working people”
“We don’t build enough, train enough or invest enough. We will be bold in reforming education, reforming welfare, delivering infrastructure, building the Northern Powerhouse…. This is a big budget for a country with big ambitions”
Summary of key announcements effecting economy, business and pay.
Introducing a new National Living Wage of over £9 an hour by 2020.
From April 2016, a new National Living Wage of £7.20 an hour for the over 25’s will be introduced. This will rise to over £9 an hour by 2020.
The government will run a surplus in 2019-20
The deficit will be reduced by around 1% of GDP (the value of the economy as a whole) on average in each year, which is the same pace as over the last 5 years. This means a surplus (where more tax is raised than is spent) will be achieved in 2019-20, and debt will fall in every year.
The tax-free Personal Allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016
The tax-free Personal Allowance – the amount people earn before they have to start paying Income Tax – will increase to £11,000 in 2016-17.
The government has an ambition to increase the Personal Allowance to £12,500 by 2020, and a law will be introduced so that once it reaches this level, people working 30 hours a week on the National Minimum Wage won’t pay Income Tax at all.
Reforming the welfare system to make it more affordable
The welfare system will be reformed to make it fairer for taxpayers who pay for it, while continuing to support the most vulnerable.
Reforming dividend tax
The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased.
Taking the family home out of Inheritance Tax
From April 2017, each individual will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death. This will be phased in from 2017-18.
The amount people with an income of more than £150,000 can pay tax-free into a pension will be reduced
Most people can contribute up to £40,000 a year to their pension tax-free. From April 2016, this amount will be reduced for individuals with incomes of over £150,000.
The higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17
Corporation Tax will be cut to 19% in 2017 and 18% in 2020
The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, in order to boost UK competitiveness. It will now fall further, from 20% to 19% in 2017, and then to 18% in 2020, benefiting over a million businesses.
The annual investment allowance will be set at its highest ever permanent level at £200,000
The allowance means businesses can deduct the full value of certain items, including equipment and machinery, up to a total value of £200,000 from their profits before tax. This helps them with cash flow because it means the full tax relief is given in the year items are purchased, rather than over several years.
The Employment Allowance will increase by a further £1,000 to £3,000
Businesses will have their employer National Insurance bill cut by another £1,000 from April 2016, as the Employment Allowance rises from £2,000 to £3,000. The Employment Allowance gives businesses and charities a cut in the employer National Insurance they pay.
The standard rate of Insurance Premium Tax will increase to 9.5%
3 million new apprenticeships
30 hours of free childcare for 3 and 4 year olds
From September 2017, working families with 3 and 4 year olds will receive 30 hours of free childcare – an increase from the 15 hours they’re currently offered.
Public sector pay will increase by 1%
Making sure individuals and businesses pay what they owe
Extra investment between now and 2020 for HMRC’s work on evasion and non-compliance
- tripling the number of criminal investigations HMRC can undertake into complex tax crime, concentrating on wealthy individuals and companies
- allowing HMRC to access more data to identify businesses that aren’t declaring or paying tax
- clamping down on the organised crime gangs behind the illicit trade in tobacco and alcohol
- stopping investment fund managers from using tax loopholes to avoid paying the correct amount of Capital Gains Tax on their profits from the fund (this is known as carried interest)
- making sure international companies pay tax on profits diverted from the UK
- introducing a ‘general anti-abuse rule’ penalty and tough new measures for serial avoiders, including publishing the names of people who repeatedly use failed tax avoidance schemes