The Budget 2016 – The Highlights and Summary

The Budget 2016 – The Highlights and Summary

George Osborne has revised down the UK’s growth forecast in his 8th Budget and warns about a “dangerous cocktail” of global economic risks. However, he believes the UK is “well placed” to handle it. Mr Osborne will seek to save £3.5bn by 2020 through extra spending cuts.

  • He froze fuel duty but announced a 2% increase in tax on cigarettes, with 3% on rolling tobacco.
  • He said the £530m raised by a tax on the makers of sugary drinks would be spent on boosting school sports.

Mr Osborne said the Office for Budget Responsibility had made clear its forecasts were based on the assumption the UK would remain in the UK and had warned that “there appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty”.

Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement and GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago.

Key Announcements 

  • Mr Osborne confirmed that he has failed to meet a fall in debt as a proportion of GDP this year.
  • The UK is still on course to clear its deficit by 2019/20.
  • Corporation tax to be cut to 17% by April 2020 – great news for small business.
  • An extra £700m for flood defences – to be paid with a 0.5% increase on the tax on insurance premiums.
  • Reforms to business rates which will mean 6,000 small businesses pay no rates and 250,000 have their rates cuts from April 2017.
  • New action to tackle overseas retailers who who store goods in Britain and sell them online without paying VAT.
  • New tax free allowances for “micro entrepreneurs” who rent their homes or sell services through the internet.
  • Chancellor George Osborne has unveiled a tax on the makers of sugary soft drinks to tackle childhood obesity.

Savings, Allowances and Tax

  • A new lifetime ISA to be introduced allowing anyone under 40 to save £4,000 per annum till age 50 and receive tax relief at 25%.
  • ISA limit to increase from £15,240 to £20,000 in April 2017.
  • Personal allowance to increase to £11,500 by April 2017.
  • Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers.
  • The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017.
  • The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished.

Business

  • Headline rate of corporation tax – currently 20% – to fall to 17% by 2020.
  • Anti-tax avoidance and evasion measures to raise £12bn by 2020.
  • Annual threshold for small business tax relief to be raised from £6,000 to a maximum of £15,000, exempting thousands of firms.
  • Supplementary charge for oil and gas producers to be halved from 20% to 10%.
  • Petroleum revenue tax to be “effectively abolished”.
  • £9bn to be raised by closing corporate tax loopholes and tax minimisation schemes.
  • Use of “personal service companies” by public sector employees to reduce tax liabilities to end.
  • Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight.

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