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Tax Tip

Chancellor George Osborne delivers his last budget before the General Election

In his final Budget before the May 7 poll, the Chancellor announced a new personal allowance which would mean 95% of all savers would pay no tax on their savings, and he said that he was creating a new help-to-buy ISA which would see the Government add £50 to every £200 first-time buyers put away towards a deposit.

The chancellor declared in his speech, which lasted 59 minutes, that "Britain is walking tall again" after five years of coalition government. His Budget painted the picture of a "comeback country".

The main points of the budget are:

State of the UK economy

Growth
The Office for Budget Responsibility (OBR) say UK grew 2.6% in 2014, faster than any other advanced economy but lower than 3% predicted in December

2.5% growth forecast in 2015, up from 2.4% predicted in December, followed by 2.3%, 2.3%, 2.3% and 2.4% in the next four years

Record employment in the UK, with jobless rate to fall to 5.3% this year

Trade deficit figures "the best for 15 years"

Living standards "higher" than in May 2010, according to OBR data, with households better off by an average of £900 in last five years

Inflation
Inflation projected to fall to 0.2% in 2015

Debt
Debt as a share of GDP falls from 80.4% in 2014/15 to 80.2% in 2015/16, then 79.8%, 77.8% and 74.8% in subsequent years before reaching 71.6% in 2019/20.

To deliver falling debt, Government must achieve £30bn more in savings by 2017/18 - £13bn from Government departments, £12bn from welfare savings and £5bn from clamping down on tax avoidance and evasion.

Public borrowing and Deficit

Deficit halved since 2010 as a share of national income

Borrowing stood at £150bn at the start of this parliament, and is set to fall from £97.5bn in 2013-14 to £90.2bn in 2014-15, £75.3bn in 2015-6, £39.4bn in 2016-7, £12.8bn in 2017-8 before reaching a £5.2bn surplus in 2018-9

Debt as a share of GDP to fall from 80.4% in 2014 to 80.2% in 2015-16 before falling in every year, reaching 71.6% in 2019-20

Welfare bills set to be an average of £3bn lower each year than predicted in December, and interest charges on government gilts £35bn lower

Squeeze on public spending to end a year earlier than planned, so 2019/20 spending grows in line with the growth of the economy - bringing state spending as a share of national income to the same level as in 2000.

Banks

A total of £5.3bn of extra taxes to come from the banking sector over five years as banks are stopped claiming relief on compensation claims and the bank levy - intended to bring in £2.9bn of revenue a year - to be increased to 0.21% to bring in extra £900m.

Sale of £13bn of mortgage assets held by the Government after the bailout of Northern Rock and Bradford & Bingley is going to be launched. This will be used to pay down the national debt.

Another £9bn of Lloyds Banking Group shares to be sold this year - to be used to sell down the national debt

Pensions

Pension pot lifetime allowance to be reduced from £1.25m to £1m from next year, saving £600m annually.

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

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 tax to rise by above inflation from £42,385 to £43,300

Annual paper tax returns to be abolished

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

Review of inheritance tax avoidance through "deeds of variation"

Business

National Minimum Wage to be at least £8 by the end of the decade - and will rise by 20p an hour to £6.70 from October.

Unemployment set to fall by 0.1% from 5.4% to 5.3%.

Employers’ National Insurance contributions for under-21s to be abolished from this April, and for young apprentices from April 2016.

Class 2 National Insurance contributions for the self-employed to be abolished entirely in the next parliament.

The North sea Oil Industry to receive an extra £1.3bn through a number of measures, including cutting the petroleum revenue tax to 35% from 50% and cutting the supplementary charge to 20% from 30%, back-dated to January

Review of business rates

Farmers to be allowed to average incomes for tax purposes over five years.

Consultation on tax relief for local newspapers

Automotive industry to receive £100m in investment in the race to driverless technology.

Eight new enterprise zones across Britain – including Blackpool and Plymouth.

Expanded support for creative industries, including a new tax credit for orchestras.

New investment in transport and regeneration across London, and funding to address acute housing shortages in the capital.

£1m to buy defibrillators for public places, including schools.

Funding for wifi in public libraries and new national plan for ultra-fast broadband to nearly all homes in the country.

Up to £600m to clear new spectrum bands for further auctions, improving mobile phone coverage nationwide, including in remote communities.

Taxation

Corporation tax to be cut to 20% in two weeks’ time.

Review on the use of deeds of variation to avoid inheritance tax to report by the autumn.

"More generous" tax credits for TV and film, expanded support for video games industry and new tax credit for orchestras, and a consultation on tax support for local newspapers.

Trebling in £15m fund for church roof appeals, and extension to £8,000 in automatic gift aid to benefit 6,500 small charities.

Tax avoidance

Measures on tax avoidance and evasion to raise £3.1bn over the forecast period.

Legislation next week on diverted profits tax aimed at multinationals shifting profits offshore, with policy to take effect at the start of April.

Alcohol, tobacco and gambling

Beer duty to be cut for the third year running, with 1p off the price of a pint. Cider duty to be cut by 2%. Duty on scotch whisky and other spirits to be cut by 2%. Wine duty to be frozen.

Tobacco and gaming taxes to remain unchanged

New horse racing betting right

Energy and fuel

Petrol duty frozen - September's planned increase scrapped

Savings

A personal allowance of £1,000, or £500 for higher rate tax payers (over £42,701), on interest received on savings

ISA freedom: £15,240 tax free allowance remains even if cash withdrawn

"Fully flexible" ISA will allow savers to withdraw money and put it back later in the year without losing any of their tax-free allowance

New "Help to Buy" ISA for first-time buyers will allow government to top up by £50 every £200 saved for a deposit.

Armed forces

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

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

Local councils

New powers for Mayor of London over skills and planning

Greater Manchester councils to be allowed to keep 100% of growth in business rates

Toll for Severn River crossings to be reduced from 2018

South West to receive £7bn in transport investment.


If you'd like to read the full Budget, click here for all 124 pages.

We at ABDS will keep you informed of any further developments. If you need any help and advice for your business on the implications of the Chancellors Budget, contact Lavinia Newman, Stuart Coleman or Liz Kennett to discuss how ABDS can help


ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

Brilliant with numbers   
Great with people  
Clear and precise with advice
Timely and cost effective 
In touch with issues that face our clients and mindful of their long term strategic goals

Helping Your Business is Our Business

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