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On the 8th July, Chancellor George Osborne gave his 7th budget, and his first as part of the majority Conservative government.
In this budget we saw a large number of shakeups, not least in the economy and business portions, as well as in personal tax & pay, and the ongoing battle with our national deficit.
In our analysis we’re going to summarise the key points from the areas listed above, although if you’re looking for a more detailed breakdown, the BBC have done an excellent analysis.
Economy & Deficit
Firstly the overall good news for everyone, the Government’s figures showed the UK economy grew by 3% in 2014, with a 2.4% growth forecast for this year (although that is still 0.1% lower than was predicted in March).
Ongoing forecasts predict an increase of 2.3%, 2.4%, and 2.4% again in 2016, 2017, and 2018.
The Chancellor has promised to cut the deficit at the same pace as last session of Parliament, which is expected to help the country reach a budget surplus in 2019-20, a year later than expected.
Despite that, borrowing is expected to reach £43.1bn (down from £69.5bn currently), and reach £24.3bn and £6.4bn in the following years, before reaching the promised surplus around 2019-20 of £10bn.
Business
There was a lot of news for business owners in this budget, most of it positive, some of it clamping down on what the Government – and public – see as business excess or people taking advantage.
Falling into the former half:
- The corporation tax rate is to be cut by 2017 to 19%, and another 1% drop by 2020
- £7.2 billion is to be sought by clamping down on those who participate in tax avoidance, and to quieten claims of HMRC under-funding, their budget is due to be raised by £750m
- The allowance for National Insurance will be increased by 50% up to £3,000 from 2016 onwards for small firms
- The annual investment allowance is to be set at £200,000 from January 2016, indefinitely
- There will be a levy on new apprenticeships for large employers
- Consultations are due to take place to decide the fate of Sunday trading laws
- The dividend tax credit is going to be replaced with a new tax-free allowance (£5,000) on dividend income.
Falling under the category of the Government reigning in business:
- Permanent non-domicile (“non-dom”) status is going to be scrapped. The new rules say that from April 2017, anyone living in the UK for over 15 years in the past 20 years will pay the same tax as current UK citizens. It is expected this alone will bring in £1.5bn.
- There is to be a cap on charges imposed by claims management companies, coupled with an increase in insurance premium tax to 9.5%
- The climate change levy exemption for renewable electricity is going to be scrapped
- The bank levy rate is going to get reduced over the coming 6 years, coupled with an 8% surcharge on profits banks make from 2016 onwards
Personal Tax and Pay
- Much appreciated by many young people, we are sure, the national living wage for people over 25 is to be increased to £7.20 per hour, and is expected to be £9 per hour by 2020
- The tax on inheritance threshold is set to rise to £1 million
- The 40 pence income tax rate is going to rise to £43,000 in 2016
- By next year, the personal allowance is going to raise to £11,000, reaching £12,500 by 2020
What do you think about the changes proposed in this budget? Leave your feedback in the comments below!
