George Osborne has unveiled his final Budget before the general election, telling MPs “Britain is walking tall again” after five years of austerity.
There were a few changes that are likely to be of interest in today’s Budget. You can download the full official Budget 2015 document here.
A critical highlight that is important to us here at AccountancyAnywhere is Osborne’s comments that he confirmed plans to scrap annual tax returns and replace them with “digital tax accounts“, allowing people to manage their affairs using smartphones or computers, making full use of cloud accounting technology.
Mr Osborne hailed slightly better than expected growth figures, which suggest the economy will expand by 2.5% this year, rather than 2.4% and described his economic package as a “Budget for Britain – a comeback country”.
He said the government had met its 2010 target to end this Parliament with Britain’s national debt falling as a share of GDP, meaning the
the hard work and sacrifice of the British people has paid off.
We took difficult decisions in the teeth of opposition and it worked. Britain is walking tall again.
Five years ago, our economy had suffered a collapse greater than almost any country.
Today, I can confirm: in the last year we have grown faster than any other major advanced economy in the world.
Budget Highlights
The chancellor George Osborne cut 1p from beer duty, 2% from cider and scotch whisky – and froze fuel, wine and tobacco duty.
This a budget that people won’t believe from a government that is not on their side,
Ed Miliband told MPs.
Osborne said he would use a boost in the public finances caused by lower inflation and welfare payments to pay off some of the national debt and end the squeeze on public spending a year earlier than planned.
Major Key announcements in today’s Budget update were:
Personal allowance
The personal tax free allowance is to go up to £10,800 in 2016/17 and £11,000 in 2017-18.
In 2016-17 the basic rate limit will be £31,900 meaning that the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,700. In 2017-18 the higher rate threshold will be £43,300.
The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.
Abolishing Class 2 NIC
Class 2 NIC’s are paid by the self employed although only at a rate of around £2 per week. They plan to abolish these at some point in the next Parliament.
Deed of variation
They will be starting a consultation of how these are being used to avoid tax/IHT.
Personal savings allowance
The main change is the new Personal Savings Allowance. From April 2016 the first £1,000 of savings interest earned by basic rate taxpayers will be free of income tax. Higher rate taxpayers will have an allowance of £500. If you earn above £150,000 it doesn’t appear that you’ll qualify for the personal savings allowance.
The automatic deduction of 20% tax at source from bank/building society interest will also stop.
In the 2014 Budget 2014, it was announced that from April 2015 you won’t have to pay tax on your interest if your taxable income is less than £15,600.
When you add in the £1,000 new allowance you won’t have to pay tax on your interest if your taxable income is less than £16,600.
Capital Gains Tax
Not many additional changes here regarding Capital Gains Tax (CGT) as the main change for non UK residents being within the scope of CGT has already been announced.
One change is to amend the tax legislation so that for Entrepreneur Relief purposes the definitions of a ‘trading company’ and ‘the holding company of a trading group’ do not take account of activities carried on by joint venture companies which a company is invested in, or of partnerships of which a company is a member. This will ensure that a company would need to have a significant trade of its own in order to be considered as a trading company. This is to combat the use of Joint Venture companies to increase Entrepreneurs Relief.
ISA changes
The ISA will be more flexible (allowing you to take money out and repay it before the end of the tax year) and there will also be a “help to buy” ISA for first time buyers. This suggests that 95% of savers would pay no tax on their cash savings. Osborne also announced a new help-to-buy ISA which will see the government add £50 to every £200 first-time buyers put away towards a deposit – in a move that will come into effect later this year.
Most of the big changes have been announced over the last 12 months including:
- Non resident CGT charge
- Increase in the RBC for non doms
- Expansion of the ATED
Other changes
The Treasury has also reported other potential changes including a new IHT relief for a main residence left to children. This could potentially exempt properties valued at up to £1M from IHT.
Some of the plans in Mr Osborne’s statement – such as many of the ISA changes – are likely to depend on a Conservative victory on 7 May. Whoever wins the election is likely to set out another Budget later this year.
The Lib Dems will unveil their own tax and spending plans for the next five years on Thursday, which are likely to feature greater tax rises than planned by the chancellor.