Chancellor George Osborne announced a series of bold measures affecting business, individuals and the welfare state in his Second Budget.
Heralding the plans as a ‘big Budget for a country with big ambitions’, the Chancellor unveiled his announcements with the stated aim of moving from a ‘low wage, high tax, high welfare economy to the higher wage, lower tax, lower welfare country we intend to create’.
The Chancellor announced that the Office for Budget Responsibility had revised down its UK economic growth forecast to 2.4% for 2015, and that the budget surplus will now be reached a year later than planned, in 2019/20. However, the Chancellor was keen to emphasise the importance of Britain ‘getting its house in order’.
Key business measures
- Annual Investment Allowance to be set at £200,000
From January 2016, the Annual Investment Allowance will be set at £200,000, rather than £25,000 as previously planned.
- Additional corporation tax cuts
The Chancellor announced future reductions in corporation tax to bring the rate to 18%.
Employment Allowance to be increased
From 2016, the Employment Allowance will be increased by 50%, allowing employers an exemption from national insurance contributions of up to £3,000.
- New apprentice levy for large firms
A new apprenticeship levy will be applied to all large firms, to help fund the cost of training apprentices.
Key personal measures
- New inheritance tax allowance for main residences
From 2017, a new main residence allowance will apply, starting at £100,000 and rising to £175,000 by 2021. This could allow families to pass on up to a total of £1m to their children without paying inheritance tax.
- Personal allowance to rise
The income tax personal allowance will increase to £11,000 from April 2016, and the higher rate threshold will rise to £43,000.
- New National Living Wage
From April 2016, a new National Living Wage will apply to workers aged 25 and above, set initially at £7.20 an hour and rising to £9 an hour by 2020.
Pensions tax relief annual allowance to be reduced
From next year, the pension tax annual allowance will be tapered away to a minimum of £10,000.
The Chancellor announced further details of the much-anticipated £12bn of welfare cuts, including a four-year freeze for most working-age benefits, a reduction in the household benefit cap to £20,000 (£23,000 in London), and the introduction of a new two-child limit for Tax Credits, for those children born from April 2017. Student maintenance grants will also be scrapped, together with housing benefit for under-21s.
Other key announcements
Other measures announced include a freeze in fuel duty for the rest of the year, a planned relaxation of Sunday trading laws for England and Wales, and a new roads fund to be supported by Vehicle Excise Duty.