The Chancellor has presented his Budget to Parliament – below is a summary of what was announced.
1. A surplus by 2019-20 – This year the deficit will have been cut by almost two thirds from its peak. Over the next 4 years, the deficit will have been eliminated and the government will be running a surplus – where more tax is raised than is spent. There will be a further £3.5 billion of savings from departmental spending in 2019-20, less than 50p in every £100 the government spends. There will be an efficiency review to inform future spending decisions.
2. Double the dedicated funding for sport in primary schools, paid for by a levy on soft drinks – Soft drinks companies will pay a levy on drinks with added sugar from April 2018. This will be used to double the primary PE and sport premium (the additional money schools have to spend on PE and sports) to £320 million a year.
3. A longer school day for 25% of secondary schools – 25% of secondary schools will be able to opt in to a longer school day from September 2017 so that they can offer a wider range of activities for pupils. There will be up to £285 million a year to pay for this.
4. Every school will be an academy by 2022 – Every school in England will be an academy or free school – or be in the process of becoming one. This will give head teachers more control over their budget and the curriculum they teach. The current system for funding schools will also be replaced by a fairer national funding formula from April 2017.
5. Lifetime ISA – From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money. Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home. The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.
6. The Personal Allowance will increase to £11,500 – This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017. The point at which you pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.
7. HS3 between Leeds and Manchester – £60 million has been announced to develop plans to cut journey times to around 30 minutes between Leeds and Manchester, as well as improving transport connections between other cities in the north.
8. £80m to give Crossrail 2 the go-ahead – This will be used to continue planning for Crossrail 2. The proposed Crossrail 2 route will connect South-West and North-East London, increase tube capacity and reduce the pressure on Victoria and Waterloo stations.
9. £100m to help people move on from emergency hostels and refuges – This will pay for 2,000 places to live for those who need to move on from emergency hostels and refuges.
10. New tax allowances for money earned from the sharing economy – From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own. People who make up to £1,000 from occasional jobs will no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.
11. Freezing beer duty to help pubs – Duty rates on beer, spirits and most ciders will be frozen this year.
12. Fuel duty will be frozen again in 2016-17 – saving the typical motorist £75 a year. By the end of 2016-17 fuel duty will have been frozen for 6 years.
13. Making sure large companies can’t artificially shift profits out of the UK – Some large companies use excessive interest payments to reduce the tax they pay on their profits in the UK. Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments. Over the next 5 years, the government will raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures.
14. Tax support worth £1bn for the oil and gas industry – This includes effectively abolishing Petroleum Revenue Tax (a tax on profits from oil fields approved before 1993) and dramatically reducing the supplementary charge on oil and gas extraction.
15. Cutting business rates for all rate payers – From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.
16. Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates – From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%. There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers). Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).
17. Employers will pay National Insurance on pay-offs above £30,000 from April 2018 – From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due. For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.
18. Corporation Tax will be cut again to 17% in 2020 – The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.
19. Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018 – Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year. From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs. Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits. After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.
20. New stamp duty rates for commercial property from 17 March 2016 – The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. From 17 March 2016 the rates will apply to the value of the property over each tax band. The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. Buyers of commercial property worth up to £1.05 million will pay less in stamp duty. Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million.
21. More funding to protect homes and businesses from flooding – Funding for new defences including in Leeds, York, Calder Valley and Cumbria and for maintenance of existing defences. This will be paid for by Insurance Premium Tax, a tax on insurers. The standard rate will rise from 9.5% to 10%.
22. A new tax relief for museums and galleries will be introduced – This will be available to temporary and touring exhibitions from April 2017 – this will help museums and galleries create new exhibitions and display them around the UK. The government will consult on this during 2016.
23. Veterans will be able to keep payments from war pensions rather than using this to pay for social care – From April 2017, 4,000 Armed Forces veterans will be able to keep payments from their war pensions if they need social care.