It is the final and probably most important instalment of George Osborne’s Budget statements in this Parliament. We are in the countdown to the General Election with Parliament due to be suspended on 30 March.
With a week of announcements and leaks, one wondered whether this Budget would have any surprises. It did, largely for savers and first-time buyers.
Given the focus on the election it was not surprising that this Budget was heavy on facts and figures. Growth forecasts, debt as a percentage of GDP, inflation and employment levels. The Office of Budget Responsibility (OBR) has revised growth predictions to 2.5% for 2015, 2.3% next year and eventually rising to 2.4% in 2019.
There has been much media attention on the minimum wage and as expected, Mr Osborne announced the increase to £6.70 with a planned rise to over £8 by the end of the decade.
Not many surprises given the recent headlines.
The personal allowance is to rise to £11,000 in 2016/17 and will be £10,800 from 6 April 2015. The higher rate tax threshold will increase from £42,385 in 2015/16 to £43,300 resulting in an increase above inflation.
To support the self-employed, Class 2 National Insurance contributions are to be abolished entirely. The jolly task of completing the annual tax return is to be no more with a move to the digital collection of information over the next 5 years.
It was acknowledged that with falling food prices, life is difficult for farmers. As a result, farmers will be entitled to have their income assessed over a 5 year period.
The annual bank levy is to rise to 0.21% resulting in an expected revenue of £900mn.
There were a number of measures to provide support to North Sea oil producers following the significant fall in oil prices, including a reduction in the petroleum revenue tax from 50% to 30%.
The ‘Google’ tax remains high on the agenda and will come into effect next month. This is a tax on diverted profits on multinational corporations where profits are “artificially moved offshore”.
Following on from the Autumn Statement, the law is to be changed allowing pensioners to access their annuities. The 55% charge will be abolished and instead any tax charged at marginal rates.
Most notably, the annual lifetime allowance for pensions is to be reduced from £1.25mn to £1mn from April 2016. The Chancellor announced that from 2018 the lifetime allowance will be index linked.
Savers and first-time buyers
This was the really interesting bit with major changes in three key areas.
The introduction of the “fully flexible” ISA will allow savers to withdraw their money and put it back in the same year without losing their tax-free status.
A new Personal Savings Allowance will be introduced ensuring the first £1,000 of savings will be tax free (or £500 for higher rate taxpayers). HMRC has announced that from April 2016, banks will stop automatically deducting income tax from interest earned on non-ISA savings.
With the continued rise in property prices it is becoming increasingly difficult for first-time buyers to get on the property ladder. The government announced the “Help to Buy” ISA and with every deposit made, they will contribute an additional 25%. So, for every £200 saved the government will add £50 up to a maximum of £3,000 per person. The bonus will be available on purchases of up to £450,000 in London and £250,000 outside London.
The Chancellor announced a review of deeds of variation in the Autumn Statement following wide consultation. Deeds of variation enable the beneficiary of an estate to divert assets to other individuals or charities, sometimes reducing the amount of inheritance tax payable. It remains to be seen whether there will actually be any changes.
Capital gains tax
Although not set out in detail in the Budget, there are changes to entrepreneurs’ relief (ER) for capital gains tax (CGT). The objective is to ensure people do not use the joint venture rules to set up structures in which they only have a small indirect stake in the trading company and benefit from ER. Those who do benefit from ER must have a 5% directly-held shareholding in a genuine trading company. The detail will be published in the Finance Bill 2015.
As previously announced, non-residents will pay CGT on disposals of UK residential property with effect from 6 April 2015. It is important to be aware that any tax return and payment of tax must be made within 30 days after the day of completion. Different rules apply for payment of the tax if you are already within the UK self-assessment regime.
The increase in charges announced in the Autumn Statement remain unchanged in respect of the annual tax on enveloped dwellings (ATED). This charge will apply to properties worth between £1mn and £2mn from 1 April 2015 and for properties worth between £500,000 and £1mn from April 2016. Those charges will start at £7,000 and £3,500 respectively.
New measures are to be introduced targeting serial tax avoiders and promoters of tax avoidance schemes. Danny Alexander is to announce these tougher measures tomorrow (19 March 2015).
The Liechtenstein and Crown Dependencies Disclosure Facilities (which allow taxpayers to regularise their tax affairs) were due to end in April 2016 and September 2016 respectively. It has been announced that the end date is being brought forward to December 2015. A new disclosure facility has been announced for thereafter but with tougher terms including an increased minimum penalty of 30% and no guarantees that criminal investigations will not be pursued.
Church roofs, Manchester, pints and other snippets
If those saving opportunities are not for you, you can always spend your money on a cheaper pint. Beer duty is to be cut by 1p and if that is not your tipple, cider and whisky will be cut by 2p.
Good news for churches and small charities. The £15mn church roof repair fund is to be trebled. The maximum annual donation that can be claimed through Gift Aid Small Donations Scheme (GASDS) will also rise to £8,000 from £5,000.
In a bid to give more autonomy to the regions, Greater Manchester councils will be allowed to keep 100% growth in business rates.
As many expected, a Budget aimed at pensioners and savers. The Chancellor started his statement by telling MPs that “Britain is walking tall again”. It remains to be seen whether the population agree with him and depending upon the outcome on 7 May, this may be Mr Osborne’s sixth and final Budget statement. Watch this space.