Highlights of George Osbourne’s 7th Budget. A Budget for working people
George Osbourne “A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create”.
Economy growing faster than any other advanced economy, UK has created 2 million more jobs in the last 5 years. British economy is fundamentally stronger than 5 years ago.
- Business investment was 31.9% higher than 2010 and revised up again this year.
- The deficit – that’s the gap between borrowing and income – was 10.2% of national income in 2010. This year it’s expected to be 3.7% and 2.2% in 2016/17, budget surplus in 2019/20.
- Borrowing forecasts – £69.5bn for the fiscal year we are in, £43.1bn next fiscal year and £23.3bn in 2017/18. Then it will be £6.4bn in the year to April 2019.
- The NHS will receive £8bn on top of the extra £2bn provided this year, or £10bn a year more by 2020.
- Bank levy rate to be gradually reduced over the next six years. However, a new 8% surcharge on bank profits will be introduced from 1st January 2016.
- Public sector pay awards of 1% a year for next four years.
Non-domicile tax rules, in place since 1914. George Osbourne says they have an “important place” and won’t be dumped outright, but “it is not fair for people to be born in the UK” to non-dom parents and then claim to be non-doms themselves. Putting homes in offshore companies is not fair either, nor is permanent use of the status, he says. From 2017, non-doms who’ve spent 15 of the last 20 years in the UK will pay the same tax as everyone else, he says. The new rules will raise £1.5bn.
- Claims management companies will be more strictly regulated and insurance premium tax will be raised to 9.5% from November.
- New Vehicle Excess Duty (VED) will be introduced for all brand new cars and there will be bands depending on how polluting they are, the funds generated will be used to create a new roads fund.
- Fuel Duty will remain frozen this year.
- Student maintenance grants replaced with loans from 2016/17.
- Further powers devolved to the Greater Manchester Area, including the fire service.
- New apprenticeship levy introduced on large firms.
- As expected, there’ll be the option to relax Sunday trading hours. Local councils and their Mayors will have the power to set the hours in their areas.
- From 2017, there will be a new £175,000 allowance on homes left to children or grandchildren, allowing £1 million to be passed on tax-free.
Mortgage interest payments can be offset against income for buy-to-let landlords, an unfair advantage over people buying homes to live in, George Osbourne says. This has fuelled buy-to-let mortgages, which are now 15% of the market. Mortgage interest relief will be restricted to the basic rate of interest, he says. Room rental tax relief will be raised to £7,500.mortgages, which are now 15% of the market. Mortgage interest relief will be restricted to the basic rate of interest, he says. Room rental tax relief will be raised to £7,500.
- Mr Osborne says the dividend tax system is “complex and archaic”. He’s replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers. The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%
- Corporation tax will be cut to 19% in 2017 and 18% by 2020.
- The BBC will to take on responsibility for funding free TV licences for the over 75s. In return the government will “give our valued public broadcaster a sustainable income for the long term”
- The chancellor says those aged 18 to 21 must either earn or learn, so he is abolishing automatic entitlement to housing benefit for that age group. This, he says, this will be new “youth obligation”.
- From September 2017, all working parents of three and four-year-olds will receive free childcare of up to 30 hours a week.
Rents paid in the social housing sector will be reduced by 1% a year for the next four years, and the income threshold in tax credits will be reduced, from £6,420 to £3,850.
Universal Credit work allowances will be similarly reduced – and will no longer be awarded to non-disabled claimants without children. The rate at which a household’s tax credit award is reduced as they earn more will be increased.
- The £26,000 cap on benefits will be reduced to £23,000 in London and £20,000 outside the capital.
- Rates of income tax remain unchanged but the thresholds do not. The personal allowance goes up to £11,000 from next year. The threshold at which the higher rate kicks in will go up to £43,000. 29m people will pay less tax.
- Mr Osborne says he will meet the Nato pledge to spend 2% of national income on defence – every year of this decade.
- New compulsory living wage of £9 hour by 2020. It’ll be £9 per hour by 2020 for people 25 and older. And it’ll start at £7.20 an hour from next April.
- Child Tax Credit will be limited to two children from April 2017
That brings to an end the Budget speech – the first all Conservative Budget since 1996.