The Budget – March 2016
The Main Points
The Budget, from Chancellor George Osborne, saw him present revised GDP figures issued by the OBR indicating growth was 2.2% for 2015, will be 2% this year, 2.2% in 2017 and 2.1% from 2018-2020.
Government borrowing is forecast to be £72.2bn for 2015/16, £55.5bn in 2016/17, £38.8bn in 2017/18, £21.4bn in 2018/19; with a surplus of £10.4bn by 2019/20 then another surplus of £11bn in 2020/21.
Debt as a % of GDP is forecast to be 82.6% in 2016/17, 81.3% in 2017/18, 79.9% in 2018/19, 77.2% in 2019/20 and 74.7% by 2020/21.
Tax Free Personal Allowance will increase to £11,500 in April 2017; this builds on the increase to £11,000 from April 2016. The target is for this allowance to be £12,500 by the end of the parliament.
Higher Rate Tax threshold will be increased to £45,000 from April 2017 after the previous increase to £43,000 due to begin April 2016.
George Osborne committed to reducing Corporation Tax to 18% by 2020 in last year’s Budget but he has now gone further to reduce it to 17% by this date.
Fuel Duty has been frozen for the 6th year in a row.
Class 2 National Insurance Contributions have been abolished for the self-employed.
Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers.
The ISA limit from April 2016 will be increased from £15,240 to £20,000.
The Chancellor also announced a new Lifetime ISA for those under the age of 40. There is an annual subscription limit of £4,000 but the government has committed to topping up these savings by £1 for every £4 saved. Therefore if you contribute the maximum amount each year you could receive a bonus of £1,000 a year. This ISA can be used to buy a property or as a pension after you reach the age of 60.
A new Sugar Levy has been imposed on the soft drinks industry.
The supplementary tax charge on Oil & Gas companies has been halved from 20% down to 10%.
Insurance Premium Tax has been increased by 0.5% to help to pay for additional flood defences.
Commercial Stamp Duty has been cut. The new rates will start at zero up to £150,000, with a duty of 2% on the next £100,000, rising to 5% for costs over £250,000.
Business rate relief for small companies will be increased, taking it from £6,000 to £15,000 and the higher rates from £18,000 to £51,000.
Stirling House comment:
The Chancellor delivered his 8th budget with a focus on helping savers and the young. His flagship policy to ‘put the next generation first’ was to introduce the Lifetime ISA aimed at helping and encouraging those under 40 to save for a house deposit or retirement. Whilst on the face of it this new ISA does provide an attractive saving option for the young, it’ll be interesting to see whether this deflects interest away from auto enrolment or whether this new addition just adds more complexity to an already complicated pensions market.
The further increase to the tax free personal allowance and the higher tax threshold is welcome news for household incomes. The cut in CGT rates is good news for those invested in stock and shares, but as the old rates will still apply for second homes, such as buy-to-let properties, this represents a further squeeze on landlords now that the new stamp duty rates have been implemented.
The removal Class 2 National Insurance Contributions will help with simplification and allow millions of self-employed workers keep more of their money. The announcement of further reductions to Corporation Tax will be welcome news for business enterprise and the cut in business rates is expected to mean that 600,000 more small businesses will play no rates at all.