By Warren Munson, FCCA, CTA, Managing Director.
So, we have seen the final budget from the coalition.
To begin with, there were many political statements. Osborne pushed hard on job creation, backing business and growth in the economy. There did follow some important underlying facts for our economy. He was aided by a sale of bank shares and low interest rates on Government bonds, there was some room for movement on future cuts or what some may call ‘give aways’. He appeared to resist this approach and decided instead to pay off some of the Government’s debt mountain.
The chancellor also announced some pledges for next year, with a nod to savers and first time buyers. It was clear however that one of his main missions was to convince voters that the future plans will be achievable and not as painful as he originally predicted in the forthcoming parliament.
The detail below summarises the key points announced.
- UK Growth forecast to be 2.5% for 2015 which is up from the 2.4% prediction in December. However, growth targets revised downwards to 2.3% for the next three years, when 2.4% was predicted in December.
- We are currently seeing record employment levels with the jobless expected to fall to 5.3% this year.
- Inflation is predicted to fall to 0.2% this year.
- The Budget deficit is predicted to fall to £90.2bn in 2015-16, £75.3bn in 2016-17, £39.4bn in 2017-18, £12.8bn in 2018-19 before reaching a £5.2bn surplus in 2019-20.
- Funds circa £22bn to be clawed back from sale of interests in UK banks.
- Additional assistance for exporting to China.
- Personal allowance will rise to £10,800 next year and £11,000 the following year.
- The level at which the higher rate of tax applies, will increase to £42,385 and £43,360 in 2017.
- The government intends to keep corporation tax at 20% for all companies.
- There will be a review of the annual investment allowance in the Autumn to try and continue to incentivise businesses to invest in capital expenditure.
- There will be no tax returns by 2020!! We will keep you posted on this, as our initial reaction is that this is a measure designed by HMRC to obtain immediate and live access to your personal and business records. Big Brother is watching!
- Class 2 National Insurance will be abolished for self-employed individuals.
- The so-called “Google Tax” is due to come into effect in April, taxing companies who artificially move profits and taxes from the UK.
- Additional anti-avoidance measures to follow to mitigate tax avoidance.
- National minimum wage will increase, as already announced this week, to £6.70 per hour from the Autumn.
- Fuel duty will remain frozen.
- Assistance for full-time buyers in a new “Help to Buy ISA”.
- Additional taxes for banks via the banking levy and cuts for the oil and gas industry.
- The total life time allowance for pensions is being reduced from £1.25m to £1m, but the annual amount that you can contribute to your scheme will not change.
- For basic rate tax payers, there will be no tax on the first £1,000 of interest you receive, dropping to £500 for higher rate tax payers.
- The new flexible ISA will be introduced, which will enable funds to be taken out and put back into your existing ISA without affecting your contribution limits.
As predicted we have not seen any major changes and we will wait to see what happens following the election in May. So please keep in touch and we will advise you as to when, after the election, we will run our traditional budget de-brief event.