Chancellor George Osborne delivered the first Conservative-only Budget in nearly 20 years, and announced a series of bold measures affecting business, tax and welfare in his 2015 Second Budget.
Heralding this Budget as a ‘big Budget for a country with big ambitions’, the Chancellor unveiled his announcements with the stated aim of moving from a ‘low wage, high tax, high welfare economy to the higher wage, lower tax, lower welfare country we intend to create’.
Acknowledging the ongoing risks posed by the global economy, the Chancellor reported that the Office for Budget Responsibility had revised down its economic growth forecast to 2.4% for 2015 and announced that a budget surplus will now be reached a year later than planned, in 2019/20.
In a series of moves designed to incentivise UK businesses, the Chancellor announced future reductions in corporation tax to 18%. Meanwhile, a new apprenticeships levy will be applied to all large firms.
Key announcements on personal taxation include an increase in the basic income tax personal allowance threshold to £11,000 next year, and a rise in the basic rate limit to £32,000. The pensions tax relief annual allowance for the highest earners will be reduced from next year, and a new Green Paper will propose radical changes to the pension saving system.
A new, compulsory National Living Wage will apply for those aged 25 and above from next April, while working parents will receive up to 30 hours a week of free childcare for 3-4 year olds from September 2017.
Changes to the inheritance tax rules will include a new main residence allowance starting at £100,000 and rising to £175,000 by 2021. This could allow families to pass on up to a total of £1m to their children without paying inheritance tax.
Further measures to clamp down on tax evasion and aggressive tax avoidance are expected to raise an additional £5bn and the Government will abolish permanent non-dom status from April 2017.
If you would like to discuss how these changes impact on your own personal financial planning then please get in touch.