Today, the Chancellor, George Osborne, has delivered his first budget under the new Conservative government. Here are the key points:
- Personal tax
- The personal allowance to rise to £11,000 from April 2016 (currently at £10,600). This is to increase to £12,500 by 2020.
- The threshold for the higher rate of tax (where you pay 40% tax on income) to increase to £43,000 in April 2016 (currently at £42,385)
- A new national ‘living wage’ will be introduced for all workers over 25 years old, starting at £7.20 per hour form April 2016, and which will rise to £9 per hour by 2020
- Buy to let homebuyers – the tax relief for Mortgage interest is to be restricted to the Basic rate of tax
- The permanent “non-dom” tax status to be abolished from April 2017
- Inheritance tax
- The Inheritance tax threshold to increase to £1m – to be phased in from 2017
- Pensions
- A Green paper to be published for proposals to overhaul the pensions system
- The amount people who earn over £150,000 can contribute to their pension schemes, to be reduced
- Benefits and welfare
- Tax credits and the new Universal Credit to be restricted to two children per family
- The income thresholds for tax credits to be reduced from £6,420 to £3,850
- 18-21 year olds will no longer be able to claim housing benefit, and will face an “earn to learn” obligation
- Benefits including tax credits and housing allowances, to be frozen for four years – except for maternity pay and disability benefits, which are exempt
- Subsidies for social housing for those who earn more than £30,000 (£40,000 in London) to be phased out
- Fuel
- No rise in fuel duty this year
- No mention of duties on alcohol or tobacco
- Business taxes
- Corporation tax to be cut to 19% in 2017, and to 18% in 2018
- The Employers National Insurance Allowance to be increased to £3,000 per annum from April 2016
- The current dividend tax credit system to be replaced by a tax-free allowance for dividend income of £5,000, and new rates of tax for dividend income of 7.5%, 32.5% and 38.1%
- The Annual investment Allowance to be fixed at £200,000 per annum from April 2016
- Education
- Student grants to be replaced with loans, which will be paid back once people earn more than £21,000 a year
- Housing
- The rent-a-room relief scheme to increase to £7,500 per year
- Defence
- The government to spend 2% of GDP on defence every year in line with NATO targets
