24th March 2014
The Chancellor George Osborne has delivered his fifth budget. Here are the key points;
:: Cash and share Isa’s are to be merged into a single New Isa with an annual tax-free savings limit of £15,000 from 1 July. The limit for Junior Isas will be raised to £4,000.
:: Premium Bonds cap lifted from £30,000 to £40,000 in June, and to £50,000 next year.
:: 10p rate of tax for savers to be abolished, and a Zero tax band to cover £5,000 of savings.
:: Personal tax allowance rises to £10,500 next year.
:: 40p tax rate threshold to rise from £41,450 to £41,865 from next month and then up by further 1% to £42,285 next year.
:: Transferable tax allowance for married couples rising to £1,050.
:: All retirees on defined contribution pensions to be offered free, impartial, face-to-face advice.
:: The Chancellor set out that by removing the effective requirement to buy an annuity, people will have greater flexibility in accessing their pensions. This means that people can choose how they access their defined contribution pension savings; for example they could take all their pension savings as a lump sum, draw them down over time, or buy an annuity.
:: The Chancellor has announced a number of changes to the current rules that will come into effect from 27 March 2014. This will allow people to have greater freedom and choice now over accessing their defined contribution pension savings at retirement. These are:
- Reducing the amount of guaranteed income people need in retirement to access their savings flexibly, from £20,000 to 12,000
- Increasing the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000
- Increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity
- Increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000 and increasing the number of personal pots that can be taken under these rules from two to three
:: New Pensioner Bond paying market leading rates, issued by National Savings the scheme will be available from January to all people over 65, paying interest rates of 2.8% for one-year bonds and 4% for three-year bonds.
:: The cap on the amount of Premium Bonds a person can own will rise from £30,000 to £40,000 in June and £50,000 in 2015. The number of £1m winners will also be doubled.
:: Alcohol escalator to be scrapped for all alcohol duties, instead a rise with inflation. And Scottish whisky duty to be frozen as it is “a huge British success story”.
:: Cut of 1p in duty per pint of beer.
:: Extending the Help to Buy scheme for aspiring home owners to 2020.
:: From 2015, all long haul air passenger flights carry same, lower, band B tax rate.
:: Right to Build scheme for builders of their own homes including £150m of finance to support it.
:: New £200m fund for councils “to bid for” to fix potholes across Britain.
:: Additional £140m help for flood damage.
:: September’s fuel duty rise will not be brought in.
:: Duty on fixed-odds betting terminals to rise to 25%.
:: Bingo duty will be halved to 10% “to protect jobs and protect communities”.
:: Tobacco duty to remain at 2% above inflation and escalator will not be stopped.
:: Scrapping inheritance tax for members of the emergency services who “give their lives protecting us”
:: From midnight anyone buying home over £500,000 through corporate entity to pay 15% stamp duty to “avoid abuse”.
:: Private jets, previously not taxed, will see tax levied on flights.
:: Increased disclosed tax avoidance schemes scrutiny for the wealthy.
:: Support for more than 100,000 new apprenticeships.
:: New Alan Turing Institute for computing “big data” to boost Britain‘s IT prowess.
:: New allowance for ultra high pressure, high temperature oil field for North Sea oil and gas.
:: Tax relief of up to 25% for touring theatrical productions.
:: VAT relief on fuel for air ambulances and inshore rescue boat services across Britain, and a new air ambulance for London.
:: Accept recommendation to move collection of Class 2 NICs into self-assessment, abolishing for 5 million people “this wholly unnecessary bureaucracy”.
:: Corporation tax – high street stores will get £1,000 off their rates, and businesses the £2,000 Employment Allowance.
:: From next year, corporation tax to drop from 21% to 20% and under-21s taken out of the jobs tax.
:: Business rates discounts and enhanced capital allowances will be extended for another three years.
Spending and Welfare
:: Foreign aid to be 0.7% of national income.
:: Public sector spending reduction to reach £1bn by 2015-16.
:: A permanent cap on welfare, excluding state pension, set at £119bn in 2015-16, rising in line with forecast inflation to £127bn in 2018-19.
:: Independent OBR growth forecast revised upwards to 2.7%, up from 2.4% in Autumn Statement.
:: Growth next year is also revised up to 2.3%, then 2.6% in 2016 and 2017, with growth expected to return to long-term trend of 2.5% in 2018.
:: 1.5 million new jobs forecast in next five years.
:: Deficit this year of 6.6% reduced to 5.5% next year, then expected to be 4.2%, 2.4% and finally 0.8% in 2017-18. Following year forecast surplus of 0.2%.
:: Expect to borrow £108bn this year, £12bn less than forecast last year. No borrowing from 2018-19.
:: OBR forecasts public debt to be 74.5% of GDP this year; 77.3% next year; peaking at 78.7% in 2015-16 – lower than the 80% previously forecast – before falling to 78.3% in 2016-17, then falling to 76.5% and then 74.2% in 2018-19.
:: The new £1 coin to thwart forgery and “In honour of our Queen”.