UK Budget 2015 - The Chancellor of the Exchequer George Osborne deliver the Budget Wednesday July 08,2015

 

Chancellor George Osborne is today Wednesday July 08,2015 delivering the first purely Conservative government spending plan in more than 18 years - which could have far-reaching implications for everyones' finances.

For the first time the Chancellor will spell out exactly where he will find £12billion of welfare cuts as he attempts to tackle Britain's massive deficit while not increasing the largest source of revenue: income tax, national insurance and VAT.

George Osborne was delivering his seventh Budget  

 

Key Announcements

National Living Wage and National Insurance:

• Introduction of a new compulsory National Living Wage for working people aged 25 and over, starting in April 2016 at £7.20 an hour and reaching £9 an hour by 2020.
• Low Pay Commission to recommend future rises in National Living Wage to reach 60 per cent of median earnings by 2020.
• OBR estimates National Living Wage will cost business 1 per cent of corporate profits and result in 60,000 fewer jobs by 2020, but that by that time almost 1 million more will have been created. 
• National Insurance employment allowance for small firms to be increased by 50 per cent to £3,000 from 2016.

 Income tax:

• Higher rate income tax threshold to rise from £42,385 to £43,000 from next year, lifting 130,000 people out of the higher rate. 
• Tax-free personal allowance for income tax to be raised from £10,600 to £11,000 next year. Rates of income tax remain unchanged. 

Benefits:

• Welfare reforms announced by the Chancellor will save £12billion by 2019/20 and will be legislated for over the coming year. 
• Support for children through tax credits and universal credits to be limited to two children, affecting children born after April 2017. 
• Benefits cap to be reduced from £26,000 per household to £23,000 in London and £20,000 in the rest of the country. Social housing tenants earning more than £40,000 in London and £30,000 elsewhere to pay rent at market rates. 
• The rate at which a household's tax credit is reduced as it earns more is to be increased to 48 per cent, and the income rise disregard reduced from £5,000 to £2,500. 
• Income threshold for tax credits to be reduced from £6,420 to £3,850, with similar reductions for Universal Credit work allowances, which will no longer be awarded to non-disabled claimants without children. 
• Working-age benefits to be frozen for four years - including tax credits and local housing allowance, but excluding maternity pay and disability benefits.
• Rents in the social housing sector to be reduced by 1 per cent a year for the next four years. 
• Disability benefits will not be taxed or means-tested, and funding for domestic abuse victims and women's refuges will be increased. 
• Abolition of automatic entitlement to housing benefit for 18 to 21 year olds, who will have a new Youth Obligation requiring them to earn or learn. Exemptions for vulnerable people.
• Rate of Employment and Support Allowance paid to those deemed able to work to be aligned with Jobseekers' Allowance for new claimants. 

 Businesses:

• Corporation tax to be cut from 20 per cent to 19 per cent in 2017 and to 18 per cent by 2020. 
• Annual Investment Allowance for small and medium-sized businesses to be set at £200,000 from this year.
• Dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax to be set at 7.5 per cent, 32.5 per cent and 38.1 per cent. 
• Climate Change Levy exemption for renewable electricity to be removed. 

Inheritance tax:

• New inheritance tax allowance of £175,000 on homes left to children or grandchildren from 2017, allowing £1 million to be passed on tax-free. Reforms will ensure that those who downsize do not lose any of the allowance. 

Pensions:

• Pensions tax annual allowance to be tapered away to a minimum of £10,000 from next year.
• Green paper published on proposals for 'a radical change' to pension saving system. 

 Housing & Buy to Let:

• Mortgage interest relief on residential property to be restricted to the basic rate of income tax, phased in over four years from April 2017.
• Tax relief for homeowners who rent out a room to be increased from £4,250 to £7,500 from next year.

Motoring: 

• Fuel duty to remain frozen this year. 
• New bands for vehicle excise duty for brand new cars from 2017 - with most cars paying £140 standard charge. No change to VED for existing cars.
• All cash raised from VED in England from the end of this decade to go into a new Roads Fund to pay for investment. 

Banks & insurers:

• Bank levy rate to be gradually reduced over the next six years, while a new 8 per cent surcharge on bank profits will be introduced from January 2016.
• Cap on charges imposed by claims management companies, and an increase in insurance premium tax to 9.5 per cent, effective from November 2015. 
• Banks including RBS to be returned to private sector faster than expected, with sale of Government assets delivering record privatisation proceeds this year.

Non-Doms: 

• Non-Doms: Non-dom status abolished for people born in the UK to parents domiciled here. Permanent non-dom tax status to be abolished with anyone resident in the UK for more than 15 years of the past 20 years to pay full UK tax from April 2017, raising £1.5billion.

Devolution

• Agreement reached with 10 councils in Greater Manchester to devolve further powers to the city. 
• Counties and elected mayors to gain power to set Sunday trading hours in their areas. 

Students & apprenticeships:

• University maintenance grants to be replaced by loans for new students from 2016/17 academic year to be paid back once they earn more than £21,000. Maximum loan increased to £8,200.
• New apprenticeship levy on all large firms.

 Fiscal plan:

• The fiscal plan requires £37billion of further consolidation over five years, including £12billion from welfare and £5 billion from tackling tax evasion to be announced today, and the rest from departmental cuts to be announced in the autumn.
• Rises in public sector pay restricted to 1 per cent per year for the next four years.
• NHS to receive a further £8billion by 2020, on top of £2billion already committed.
• HM Revenue and Customs to receive extra £750million to go after tax fraud and evasion, with the aim of raising £7.2billion in extra tax. 

 Economic forecasts:

• The Office for Budget Responsibility forecasts growth for 2015 at 2.4 per cent, then 2.3 per cent in 2016, then revised up to 2.4 per cent in 2017, and for rest of decade.
• OBR forecasts almost 1 million new jobs over the next five years, but Mr Osborne says the Government's ambition is to 'go further and create 2 million more jobs'. 
• The deficit should be cut during this Parliament 'at the same pace as we did in the last Parliament', the Chancellor said.
• Mr Osborne said his plans will leave the national debt lower as a share of GDP in every future year than was predicted in March and will avoid a 'rollercoaster ride' in public spending. 
• Deficit to fall to 3.7 per cent of national income this year, then 2.2 per cent in 2016/17, 1.2 per cent in 2017/18 and 0.3 per cent in 2018/19, before moving into surplus of 0.4 per cent in 2019/20 and 0.5 per cent in 2020/21. 
• Borrowing revised down to £69.5billion this year, then revised up to £43.1billion and £24.3billion the following two years and to reach £6.4billion in 2018/19. Surplus forecast of £10billion in 2019/20 and £11.6billion in 2020/21.
• After 2019/20, deficit to be allowed only when the OBR judges real GDP growth is lower than 1 per cent a year.