Fifty days before the General Election, Chancellor George Osborne today delivered his sixth and final Budget of this Parliament.
Introducing the package of tax and spending plans to the Commons, Mr Osborne said: “Today I report on a Britain that is growing, creating jobs, paying its way. We took difficult decisions in the teeth of opposition and it worked. Britain is walking tall again.”
He said that difficult decisions had been taken and insisted the country had to stay the course, with forecasts that Britain will be running a Budget Surplus in 2018/19.
To eliminate the remainder of the deficit, he conceded that significant cuts would still be needed, including a £13billion reduction in the budget of government departments and £12billion from welfare spending.
- Key proposals
- Fuel duty
- Personal tax
- Business, enterprise and employment
- Pensions and savings
- Tax evasion, avoidance and aggressive tax planning
Mr Osborne said that this Budget came against the backdrop of rising employment, improving growth forecasts and falling debt.
Headline announcements included an increase in the personal tax-free allowance, the introduction of a Help to Buy ISA and pensioners being given the freedom to sell their annuities for a cash lump sum.
Following recent controversy over tax avoidance and evasion, there was a commitment to close loopholes, while the rate of the bank levy was also increased (which will benefit the Treasury by £900million a year).
A fuel duty increase scheduled for September has been cancelled, meaning the longest duty freeze in 20 years. The Chancellor said that the measure saved families £10 each time they had to fill up their car.
27 million people will benefit from an increase in the personal tax-free allowance. This will increase to £10,800 in 2016-17 and then rise again to £11,000 in 2017-18. This will lift four million of the lowest paid workers out of income tax altogether.
The Chancellor also confirmed an increase in the threshold at which people pay the higher tax rate. This will increase from £42,385 to £43,300 by 2017-18, above the rate of inflation.
Mr Osborne said he would cut 1p from duty on a pint of beer and two per cent from cider and scotch whisky.
Mr Osborne confirmed that in a fortnight’s time, the Government would slash corporation tax to 20 per cent – one of the lowest rates of any major economy in the world.
There was also good news for High Street businesses, with an admission from the Chancellor that the existing system needed far-reaching reform. Precise details of what changes lie in store are not expected until the Autumn Statement.
Aside from a commitment to abolish the Class 2 National Insurance contributions for the self-employed during the course of the next Parliament, there was a further promise to abolish the annual tax return altogether. 12 million people and small businesses will benefit from the “simplified system”.
The Chancellor also gave assurances there would be support for all regions of the UK. He spoke of the need to build a “Northern powerhouse”, the creation of ten new Enterprise Zones nationwide and help for industries including the motor trade, film and local newspapers.
And changes were announced for Enterprise Investment Schemes and Venture Capital Trusts, ensuring they comply with the latest state aid rules.
The Chancellor announced four key reforms which he said would mean massive benefits for those with savings and investments. Firstly, as was widely predicted, five million pensioners will be given access to their annuities, secondly plans to introduce a radically more flexible ISA were also announced.
Thirdly was the creation of the Help to Buy ISA. For every £200 a first-time buyer saves towards their deposit, the Government will top it up with £50 more.
Mr Osborne confirmed a new Personal Savings Allowance, that will take 95 per cent of taxpayers out of savings tax altogether. The measures, which take effect in April next year, create a tax-free allowance of £1,000 or £500 for higher rate payers. He hailed the move as the end of an entire system of tax collection.
There was also news that the lifetime pensions allowance would decrease from £1.25million to £1million.
The Budget promised funding for a major expansion of mental health services for children (thanks to a £1.25billion investment) and more help for those suffering from maternal mental illness. These areas have previously been seen as under-resourced and Mr Osborne admitted that those suffering with mental illness had been “forgotten for too long.”
In a move that will be welcomed by many, a scheme that allows charities to automatically claim gift-aid on their donations is set to be extended – from the first £5,000 they raise, to the first £8,000. Mr Osborne said that this would benefit over 6,500 smaller charities.
Elsewhere £75million in LIBOR fines was put aside for various good causes, including regimental charities, air ambulance services and the Church Roof Fund.
A raft of measures was announced to tackle tax evasion and avoidance and Mr Osborne vowed that individuals and businesses who flouted the laws would be made to pay their “fair share.”
A new Diverted Profits Tax would tackle multinationals who attempted to artificially shift their profits offshore. There will also be efforts made to close loopholes in Entrepreneurs Relief, changes to corporation tax rules to prevent contrived loss arrangements and confirmation that more Accelerated Payment Notices (APNs) would be issued in the year ahead.
With so many announcements leaked in the days prior, there weren’t many surprises in this Budget. But Chancellor George Osborne will be banking on his message of financial responsibility and increasing economic optimism striking a chord with the public. Summing up, he said: “Today I present the Budget of an economy stronger in every way from the one we inherited. The Budget of an economy taking another big step from austerity to prosperity.”