Budget Snapshot - Summer 2015

8 July 2015

Budget BoxThe Summer 2015 Budget statement was made today at 12.30pm by the Chancellor of the Exchequer, George Osborne.

About the Budget

Although the Chancellor presided over his sixth Budget in March, today saw the Summer or ‘emergency’ budget take place. It is referred to as an 'emergency' Budget as it comes so soon into the new Parliamentary session, which began with the State Opening of Parliament on May 27. The policies contained within the last Budget, announced on March 19, were produced by the then coalition Government, made up of the Conservatives and the Liberal Democrats. However, as a result of the Conservative's majority in the House of Commons, following the general election on May 7, the governing party now wants to set out its own policies based on its electoral mandate. PLEASE NOTE: This snapshot is not intended as an in-depth analysis of the Chancellor’s speech (we will leave that to the industry commentators and experts) but we hope this brief summary helps you gain a quick grasp on the key points delivered by the Chancellor from the dispatch box. For full details of the following headlines (and more) you may wish to visit the HM Treasury website

Budget Snapshot

Forecasts
  • Chancellor announces that this budget, a one nation budget, puts security first and is a budget for working people looking ahead to the next five years.
  • The Chancellor announced adjustments to previous growth forecasts from those previously announced in the 2015 March Budget.
    • Growth last year at 3% - up from 2.6%
    • Growth forecast for 2015 – revised down to 2.4%
    • Growth forecast for 2016 – unchanged at 2.3%
    • Growth forecast for 2017 – revised upwards to 2.4%
    • 1 million more jobs to be created over the next five years
    • OBR borrowing forecast revised down to £69.5 billion for 2015/16
    • OBR states national debt now decreased to 80.1% of GDP
Taxation/Welfare
  • New National Living Wage of £7.20 to be introduced in April 2016 (to reach £9.00 per hour by 2020 - compulsory for working people aged 25 and over)
  • £12billion in savings required through welfare changes
  • £5billion in savings through crackdown on tax evasion and avoidance
  • Corporation tax to be reduced to 19% in 2017 / 18% in 2020
  • Non-domiciled taxation status to be abolished from April 2017
  • Dividend tax credit to be replaced by £5,000 tax free allowance
  • Inheritance Tax  - up to £1million can be passed onto children without inheritance tax
    • This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant. This will be £100,000 in 2017 to 2018, £125,000 in 2018 to 2019, £150,000 in 2019 to 2020, and £175,000 in 2020 to 2021. It will then increase in line with Consumer Price Index from 2021 to 2022 onwards. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
  • NHS to receive a further £8billion over the next five years
  • Public Sector pay rises of 1% for the next four years
  • New youth obligation for 18-21 year olds to ‘earn or learn’
  • Automatic housing benefit abolished for 18-21 year olds
  • Rents in social housing sector reduced by 1% a year for next four years
  • All working parents with children age 3 & 4 to receive 30 hours of childcare per week
  • Working age benefits to be frozen for four years
  • Benefits cap to be reduced to £23,000 in London and £20,000 elsewhere
  • Threshold in tax credit to be reduced from £6,420 to £3,850
  • Tax credit and universal credit limited to two children after April 2017
  • Annual investment allowance set at £200,000
  • Personal tax allowance – increased to £11,000 from April 2016 (further rises in line with minimum wage)
  • Higher rate tax threshold – increased to £43,000 from April 2016
  • Disability benefits will not be taxed or means tested
  • Bank Levy to be reduced over the next 6 years / 8% surcharge on bank profits to be applied from January 2016
  • Insurance premium tax to be raised from November 2015 to 9.5%
Pensions / Savings
  • Green paper to be issued on reform of pensions
National Security
  • Real increase in defence budget guaranteed every year
  • Joint security fund of £1.5billion to be created by the end of Parliament
  • Commitment to meet NATO pledge of 2% of national income on defence
Housing
  • Mortgage interest relief restricted to basic rate of income tax
  • Reduced tax relief for buy-to-let landlords
  • Rent a room relief to be raised to £7,500 from 2016
Education
  • New apprenticeship levy on all large firms
  • To support Universities - From 2016/17 (academic year) maintenance grants to be replaced by loans for students. Loans only need to be repaid once the individual is earning over £21,000 per year.
Transport/Fuel/Energy
  • New car tax bands introduced for new cars from 2017
  • Vehicle Excise Duty: £140 per year for 95% of new cars from 2017
  • New roads fund will benefit from car tax payments
  • First MOT to be extended to 4 years from 3
  • Fuel duty to remain frozen this year
  • Climate change levy to be removed
Northern Powerhouse
  • Further powers to be devolved to Greater Manchester (option available to other cities)
  • £30million funding for Transport in the North
  • Various commitments to growing transport, industry and skills to create growth of Northern cities
Plus – Various other commitments and initiatives to be applied to Southern England & Wales