In the final budget of the current parliament before all parties begin campaigning for the 2015 general election, the Chancellor of the Exchequer, George Osborne, has announced a series of measures aimed at attracting public support.
The government, who introduced widespread austerity measures in 2010, has announced a budget for ‘comeback Britain.’
However, as with all annual financial statements, there will be winners and losers. Here is our roundup guide to who stands to benefit the most from today’s announcements.
One of the immediate beneficiaries of the Chancellor’s budget will be low income tax payers. The tax free allowance on income tax will increase from £10,600 to £10,800 in the following financial year and up to £11,000 by 2017-18.
The government has stated that by 2017 a wage earner will have to take home in excess of £905 a month before they begin to pay income tax at all.
Pensions and Annuities
One of the most important announcements made today related to the pensions market. The changes that the government introduced to the pensions market in 2014, making annuities non compulsory, will be extended by 2016.
George Osborne announced that pensioners who have already purchased annuities will be able to exchange them for cash, which will come as a further blow to shareholders of the already struggling annuities providers.
As of April next year, over five million annuity holders will be free of the restrictions that have forced them to keep their policies and will be able to sell the policy back to the provider.
Help To Buy ISAs
One of the most generous initiatives proposed by the government was a new Help To Buy ISA or first time buyers.
The government will add £50 to a savings pot for every 200 saved by people hoping to get a foot on the property ladder.
A personal savings allowance has also been introduced, meaning that savers will be exempt from tax on the first £1,000 of interest they earn from their savings.
Savings tax has long been a source of resentment among those who have attempted to put money aside and be prudent with their income. The Treasury believes the £1,000 interest will mean that the vast majority of savers will be exempt from payments on the interest they accrue altogether.
The Chancellor announced a further decrease in corporation tax today, bringing the main rate down from 21 percent (paid by businesses with revenue of greater than £300,000) to 20 percent.
Whilst this decrease of one percent does not appear to be huge, it is symbolic, in that it finally creates a base level of tax that all businesses pay.
Main rate corporation tax has progressively decreased throughout the life of the current parliament from 26 percent in 2011 to the current decrease announced today.
Oil Industry Help
Help in the budget for the UK oil industry has come in the guise of tax cuts and new allowances worth £1.3 billion a year.
The government announced that these measures were the result of falling oil prices worldwide.
They will come as some relief to the city of Aberdeen, where the majority of the country’s oil industry is based.
It will also be a relief to the city of London and the pension companies and other financial institutions who have invested heavily in oil shares.
One of the most eagerly anticipated announcements was the change to self assessment.
The current system for millions of tax payers is to fill in their self assessment forms, return them and pay tax by stringent deadlines or face fines and penalties.
In the next couple of years a new system of online payment will be instituted, doing away with much of the bureaucratic pain of self assessment and making life for the self employed and those with complex tax matters much easier.
There was the glimmer of hope for small businesses from another part of the Chancellor’s announcement today.
He promised to review the current system of business rates that place often crippling tax burdens on small shops, cafes and other enterprises.
The country’s drinkers will see the cost of beer, cider, and whisky reduced.
This will be of particular interest to the Scottish whisky industry, which has campaigned for a cut in duty to help revitalise the industry’s fortunes.
The total amount of tax relief available on pensions over the course of a lifetime has decreased from £1.25 million to £1 million.
Osborne stated that the cost of pension relief had grown throughout the life of the parliament by nearly £4 billion and that was ‘unsustainable’.
Relief was cut from £1.5 million to £1.25 million in 2014, and the current limit means that savings pots up to the value of £40,000 a year will benefit from relief.
The government is expected to save £600 million a year in tax relief payments, which will be used to reduce the cost of university tuition fees.
Given the negative publicity that ultra high net worth individuals and corporations have attracted in the last few years for tax avoidance and tax evasion, it is hardly surprising that the government has addressed the issue in the budget.
The Chancellor announced that he would raise a further £3.1 billion from closing tax avoidance and evasion loopholes.
One particular area where tax rules will be tightening will be in relation to inheritance tax. Deeds of variation, which are legal devices to alter a will after an individual’s death, are often used to limit the amount of inheritance tax that should be paid.
The government today announced a review into the operation of deeds of variation, suggesting that they will soon no longer be an effective way of avoiding tax.