In the first conservative party budget since 1996, George Osborne stresses the conservative mantra of getting more people back to work, off benefits, and paying less taxes and the following were some of the main points:
The Office for Budgetary has forecast growth of the UK economy greater than US, Germany and France and 1m more jobs over the next 5 years
The deficit will be cut at the same rate this Parliament as it has been over the past 5 years and a new Fiscal Charter will commit the UK to a budget surplus by 2020
- The government is continuing to target tax avoidance and aggressive tax planning and personal service companies once again have been mentioned so it is clear that the government aim to target these particularly in the next few years.
- The bank levy is going to be reduced over the next 6 years, perhaps a reaction to the threat by HSBC to move it’s HQ but a special 8% surcharge is being introduced instead – giving with one hand and taking with the other?
- Insurance premium tax will be increased from November to 9.5%, which will affect premiums for household and motor insurance policies
- A new vehicle excise duty regime is being introduced for new cars from 2017, going away from the emissions based approach to a flat rate covering most normal cars of £140pa. The duty will go directly towards road improvements, where we lag behind the world, and fuel duty remains frozen at current levels.
- To try and balance the rental vs homeowning marketplace, interest on buy-to-let mortgages (making up 15% of new mortgages) is being restricted to basic rate tax, and the rent a room limit is being increased from £4k currently to £7.5k pa
- A special inheritance tax allowance for homeowners to enable them to pass on their home to the next generation is being introduced, increasing the limit from £325k by £175k where that is part of the home. There will be special allowance made to allow for downsizing rather than forcing owners to stay in large homes which they can no longer manage.
- A green paper is going to be issued on pension reforms, such as the option of paying in tax paid money, but then being able to withdraw tax free a little like ISAs. More details will follow in due course.
- For companies the annual investment allowance which was expected to reduce to £25k this December will continue for the forseeable future at £200k pa, very welcome for small businesses where one new van or piece of machinery can cost £25k.
- The dividend tax system is going to be reformed, with £5k tax free for all, with rates from 7.5% for basic rate taxpayers and 32.5% for 40% taxpayers. The full details and implications of this will be seen in due course. Apparently this will not affect anyone paid less than £100kpa.
- There will be further reductions in corporation tax to keep the economy competitive in the worldwide market, from 19% in 2017/18 to 18% in 2020.
- The government aim of a £12k personal allowance and £50k higher rate tax limit starts from 2016/17 with an increase in the personal tax allowance to £11k and higher rate limit of £43k.
- And finally for employers the annual employment allowance is going to increase from £2k pa to £3k pa, saving employers NI costs.
This is a summary of the proposals as they were announced but the details may may change once the Finance Bill is introduced so you should seek professional advice before taking any steps based on the contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”