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As the pre-election budget commenced, there were some surprises. This budget is being described as an ‘aspirational’ budget, predominantly because some of these new changes are ‘aspirational’ and to a fair extent they are dependent on a conservative victory in May’s general election.

Therefore it is worth noting that some of these could be overturned by the next budget if a different party win May’s election.

The budget witnessed some positive changes towards savings and pensions for the majority, as well as some positive personal taxation changes, especially for farmers. Whereas for businesses the budget had a mix of positive and negative deviations.

Key points from the Chancellor’s budget were as follows:

 

 

Personal Taxation

 

  • The tax-free personal allowance to rise from £10,600 in 2015/16 to £10,800 in 2016/17 and £11,000 in 2017/18

  • 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 2017/18

  • Owing to the volatile market prices in the agricultural sector, which are very low at the moment, farmers will be able to average their income over five years when it comes to paying tax

  • Transferable tax allowance for married couples to rise to £1,100

  • There will be a review into the avoidance of inheritance tax through "deeds of variation"

  • Class two national insurance contributions for self-employed to be abolished in next Parliament

  • Annual tax return abolished from 2016 onwards, with details uploaded automatically online

  • Minimum wage to rise to £8 by the end of the decade

  • Osborne stated he eventually wants to raise tax free allowance to £12,500 and 40p rate to £50,000

Savings/Pensions

 

  • The chancellor has promised that the first £1,000 of interest earned on savings will be free of tax from April 2016 (£500 allowance for 40pc tax ratepayers), but this will require MPs to vote through the change in the Finance Bill of 2016 - after the general election

  • Measures allowing first-time buyers to get a government top-up of a maximum of £3,000 on £12,000 of savings if they put this money into a Help to Buy Individual Savings Account (Isa). These measures do not require legislation. These are earmarked to start in the autumn, allowing first-time buyers to save up to £200 a month in this Isa, plus £1,000 in the first month

  • Annual savings limit for ISA increased to £15,240

  • Other ISAs will be made more flexible, to allow savers to keep tax benefits when they take money out and put them in

  • There is also a lifetime allowance, at present, of £1.25m. It is this allowance that the chancellor wants to cut from 2016 to £1m, which the Chancellor says will affect less than 4pc of people

  • Law to be changed to allow pensioners to access their annuities, with the abolition of the 55% tax charge and tax applied at the marginal rate

  • Widows of police officers and firefighters who choose to marry again will have their existing pensions protected

Business Taxation

  • 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 mis-selling from corporation tax

  • Review of business rates

  • The national minimum wage will increase by 20p an hour to £6.70 from October. The statutory minimum for 18 to 20-year-olds will also go up by 3% from October, from £5.13 to £5.30, and by 2% for 16 and 17-year-olds, taking the rate to £3.87

  • National Insurance contributions for those aged under 21 will be abolished in April

  • 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 credit for orchestras and consultation on tax relief for local newspapers 

 Charities

  • Automatic gift aid limit for charities to be extended to £8,000

  • £15m church repair roof fund to be trebled

  • A further £75m from Libor fines to go to charities for regiments which fought in Afghanistan and government to contribute towards permanent memorial to those who died in Afghanistan and Iraq and help renovate Battle of Britain memorials

General

  • Up to £600m to clear new spectrum bands for auction to improve mobile networks: commitment to deliver ultra-fast broadband to all homes

  • New powers for Mayor of London over skills and planning

  • New inter-city rail franchise for south west of England

  • Beer duty cut by 1p and cider by 2p.

  • 2% cut in excise duty on scotch whisky while wine duty frozen

  • No changes to tobacco and gambling taxes, with 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

  • Double UK Trade and Investment's resources for Britain's exports to China

  • £1.3bn of support for the oil and gas industry through a series of tax cuts to petroleum revenue levies, supplementary charges and a tax allowance

  • Banks- Launch of a sale of £13bn of UK Asset Resolution mortgages. This is the "bad bank" of bailed out Northern Rock and Bradford & Bingley

  • £9bn of Lloyds shares will be sold this year

  • The bank levy will be raised from 0.156pc to 0.21pc

  • £25m to support army veterans, including nuclear test veterans

If you require further information on any of the above, please do not hesitate to contact a member of the Spirare team.