Yesterday, Chancellor George Osborne unveiled his seventh Budget as Chancellor of the Exchequer, and his first under a Conservative-only Government. In fact it is the first budget under a Conservative majority in Parliament since 1996 and it looks set to be the one that defines Mr Osborne’s premiership at the Treasury.
The Chancellor is referring to this Budget as providing the country with a “new contract”. The premise of the changes are that businesses will have to pay higher wages, but will pay lower taxes in return, while workers will receive higher pay but fewer benefits.
The key changes include:
- A new National Living Wage for all workers aged over 25, starting at £7.20 per hour from April 2016 and set to reach £9 per hour by 2020. At the moment the National Minimum Wage for those aged 21 and over is £6.50.
- The Personal Allowance, at which workers start paying tax, will rise to £11,000 from April 2016; and will rise to £12,500 by 2020.
- The higher rate tax band, ie. where people pay 40p income tax, will rise from £42,385 to £43,000 from April 2016.
- Inheritance tax threshold to increase to £1million, phased in from 2017; and underpinned by a new £325,000 family home allowance.
- Mortgage interest relief for buy-to-let homebuyers will be restricted to the basic rate of income tax.
- Corporation Tax will be reduced to 19% in 2017 and 18% in 2020.
- Permanent non-dom status will be abolished from April 2017. Anyone who has lived in the UK for 15 of the past 20 years will pay the same level of tax as other UK citizens. The Treasury estimate that this will raise £1.5billion.
- HMRC’s budget will be increased by £750million, to enable them to clampdown on tax avoidance and tax evasion.
- Insurance Premium Tax will increase from 6% to 9.5% from November.
- There will be an Apprenticeship Levy for large employers to fund 3million new, high quality apprenticeships.
- National Insurance Employment Allowance for small firms will be increased by 50% to £3,000 from 2016.
- Dividend tax credit will be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax will be set at 7.5%, 32.5% and 38.1%.
- The Annual Investment Allowance will be fixed permanently at £200,000 from January 2016.
- University student maintenance grants will be abolished from 2016/17, but the maintenance loan will increase to £8,200.
If you would like to discuss the impact of these changes on you and your business, please email Andrew or Jackie at Castletons Accountants.