23 Mar The UK Budget – What You Need To Know
George Osborne has announced his pre-election UK budget and has caused a stir with supporters and opposition alike. Whether you love or loathe the Tory led coalition government, you are likely to be effected by the proposed budget changes. The UK is currently the fastest growing major world economy and has an overall positive economic outlook moving forward, and the chancellor will be using this to reduce the national debt to a manageable level by 2019. But this has come at a great cost as the public spending and welfare cuts continue to hurt those in the lower income earning sector, resulting in the voices of discontent becoming louder and more ardent.
Here are the key areas you should be aware of:
Perhaps the most significant changes seen in this years UK Budget will be to the Pension sector as the chancellor seeks to overhaul what is considered an ‘archaic’ system. Whereas the normal course of action was to purchase an annuity upon retirement in order to provide an income for life, the new changes will allow pensioners to access this money to do with as they please. This will have a large impact on various sectors as cash rich pensioners look to invest their money in stable income bearing assets.
Lifetime allowance for pension savings that can be accumulated free of tax will be cut from £1.25m to £1m from April 2016
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 and firefighters who choose to marry again will have their existing pensions protected
The Budget confirmed plans to switch to “digital tax accounts” by 2020, ending the annual rush to file a tax return. Instead, individuals and small businesses will submit accounts throughout the year via computer, tablet or smartphone. Mr Osborne called it “a revolutionary simplification of tax collection”. People will be able to pay their tax at any point throughout the year and they will also be able to spread the cost by paying in instalments.
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
The tax-free personal allowance to rise from £10,600 in 2015-6 to £10,800 in 2016-7 and £11,000 in 2017-8
Transferable tax allowance for married couples to rise to £1,100
Annual paper tax returns to be abolished, replaced by digital accounts
Class two national insurance contributions for self-employed to be abolished in next parliament
Review of inheritance tax avoidance though “deeds of variation”
Alcohol, Tobacco, Gambling and Fuel
These are areas which are often more associated with winning votes rather than offering significant changes to GDP, nevertheless, changes have been made with particular emphasis on increased tax on cigarettes. The changes made to alcohol duty will save the industry £100m, according to Treasury estimates. The crowd-pleasing measures will offer a lifeline to Britain’s hard-hit pubs, which have been closing at a rate of 30 a week. With petrol duty being frozen again, there is a hint of what could become a General Election rallying call, Mr Osborne boasted: “Ten pounds off a tank with the Tories”.
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 is frozen
No changes to gambling taxes but 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
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 ISA’s 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
New “Help to Buy” ISA for first-time buyers will allow government to top up by £50 every £200 saved for a deposit
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 miss-selling from corporation tax
Review of business rates
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.
Health and Education
Consultation on proposal to offer loans of up to £25,000 for UK students studying for PhD’s and research-based master’s degrees
Mental health services to get £1.25bn in extra funding
Housing and Infrastructure
Up to £600m to clear new spectrum bands for auction to improve mobile networks: commitment to deliver ultra-fast broadband to all homes
New inter-city rail franchise for south west of England
Consultation on £1bn “tidal lagoon” in Swansea Bay to generate green energy
If you would like to know more about the information in this article then send us your questions and one of our dedicated team members will contact you.
We look forward to hearing and working with you in the future.