In the first conservative Budget for almost 20 years, Chancellor George Osborne promised a ‘big budget for a country with big ambitions’.
He wants Britain to move from a ‘low wage, high tax, high welfare economy to a higher wage, lower tax, lower welfare society.’
But among the national borrowing and debt figures, business investment and consolidation promises what does it mean for us?
BUY TO LET: George Osborne wants to create a more ‘level playing field’ in the housing market. At the moment buy to letters can offset their mortgage payments against their income and the better off amongst us, can receive back 45p for every £1 paid. But now tax relief for these wealthy landlords will be restricted to the basic rate of income tax from 2017.
PENSION REFORM: SinceApril, millions of over-55-year-olds have been able to cash in their pension pots rather than being forced to buy an annuity. And now Osborne has announced a Green Paper which suggests we treat pensions in the way we treat ISAs in that money will be put into our pension pots after tax has been paid and will be tax free at the other end.
MOTORING: From 2017 motorists who buy brand new cars will have to pay road tax which will be set according to the emissions from their car. There will be three bands – zero, standard and premium. The Chancellor says that 95% of new cars will be in the standard category and will pay £140 a year, which is less than the average £166 currently paid. Meanwhile fuel duty has been frozen, which is great news for drivers and means transport costs of food and goods won’t go up.
INHERTITANCE TAX: Inheritance tax threshold will rise to £1million for family homes which means that parents can pass the family home onto their children or grandchildren without the threat of them paying inheritance tax. This ensures that 94% of families will pay no inheritance tax at all.
ISAs: A new type of ISA which includes peer to peer loans in the tax free savings scheme has been announced. Also, changes to dividends will not affect those whose dividends are in an ISA, and they will still remain tax free. In most cases changes to the tax paid on non ISA dividends will go down. But basic rate tax payers will pay more tax on dividends if the income is over £5,000. Higher rate and additional rate tax payers will be worse off if the income from dividends is over £21,666 and £25,265 respectively.
INSURANCE: A rise in income premium tax to 9.5% will mean a rise in our insurance premiums. There are concerns that some drivers and homeowners will forego insurance or not be adequately insured if this increase is passed onto consumers. At the same time, banks will have an 8% surcharge on their profits which experts believe will be passed onto customers.
OTHER MEASURES: The new compulsory National Living Wage at £7.20 an hour will start from next year and the 40p tax threshold will rise to £43,000 while the tax free personal allowance will go up to £11,000 a year.
But those on working tax credits will see their benefits capped from £26,000 a year down to £20,000 a year, or £23,000 in London.