Highlights Budget 2015
The Budget was announced last week, here is the edited version of the speech
This week we accept the recommendations of the Low Pay Commission that the National Minimum Wage should rise to £6.70 this autumn, on course for a minimum wage that will be over £8 by the end of the decade. We have already taken steps to curb the size of the very largest pension pots. But the gross cost of tax relief has continued to rise through this Parliament, up almost £4 billion. That is not sustainable.
So from next year, we will further reduce the Lifetime Allowance from £1.25 million to £1 million. This will save around £600 million a year. Fewer than 4% of pension savers currently approaching retirement will be affected. However, I want to ensure those still building up their pension pots are protected from inflation, so from 2018 we will index the Lifetime Allowance. We have had representations that we should also restrict the Annual Allowance for pensions and use the money to cut tuition fees.
I am also today amending corporation tax rules to prevent contrived loss arrangements. And we’ll no longer allow businesses to take account of foreign branches when reclaiming VAT on overheads – making the system simpler and fairer.
We will close loopholes to make sure Entrepreneurs Relief is only available to those selling genuine stakes in businesses. We will issue more accelerated payments notices to those who hold out from paying the tax that is owed. And we will stop employment intermediaries exploiting the tax system to reduce their own costs by clamping down on the agencies and umbrella companies who abuse tax reliefs on travel and subsistence – while we protect those genuinely self-employed.
We’re giving more power to Wales. We’re working on a Cardiff city deal and we are opening negotiations on the Swansea Bay Tidal Lagoon. The Severn Crossings are a vital link for Wales. I can tell the House we will reduce the toll rates from 2018, and abolish the higher band for small vans and buses. It’s a boost for the drivers of white vans.
The legislation devolving corporation tax to Northern Ireland passed the House of Lords yesterday. We now urge all parties to commit to the Stormont House agreement, of which it was part.
Science and innovation
Our creative industries are already a huge contributor to the British economy – and today we make our TV and film tax credits more generous, expand our support for the video games industry and we launch our new tax credit for orchestras. Britain is a cultural centre of the world – and with these tax changes I’m determined we will stay in front. And we’ll invest in what is known as the Internet of Things. This is the next stage of the information revolution, connecting up everything from urban transport to medical devices to household appliances. So should – to use a ridiculous example – someone have two kitchens, they will be able to control both fridges from the same mobile phone. All these industries depend on fast broadband. We’ve transformed the digital infrastructure of Britain over the last five years. Over 80% of the population have access to superfast broadband and there are 6 million customers of 4G that our action made possible.
Small business
In two weeks’ time, we will cut corporation tax to 20%, one of the lowest rates of any major economy in the world. This April we will abolish National Insurance for employing under 21s; Next April we will abolish it for employing a young apprentice; And I can confirm today that 1 million small businesses have now claimed our new Employment Allowance.
From this April we’re also extending our small business rate relief and our help for the high street. But in my view the current system of Business Rates has not kept pace with the needs of a modern economy and changes to our town centres, and needs far-reaching reform. Businesses large and small have asked for a major review of this tax - and this week that’s what we’ve agreed to do.
The boost I provided to the Annual Investment Allowance comes to an end at the end of the year. However, I am clear from my conversations with business groups that a reduction to £25,000 would not be remotely acceptable – and so it will be set at a much more generous rate.
Today I’m announcing changes to the Enterprise Investment Schemes and Venture Capital Trusts to ensure they are compliant with the latest state aid rules and increasing support to high growth companies.
We set up the Office of Tax Simplification at the start of this Parliament and I want to thank Michael Jack and John Whiting for the fantastic work they have done. To support five million people who are self-employed, and to make their tax affairs simpler, in the next Parliament we will abolish Class 2 National Insurance contributions for the self-employed entirely.
12 million people and small businesses are forced to complete a self-assessment tax return every year. It is complex, costly and time-consuming. We will abolish the annual tax return altogether. Millions of individuals will have the information the Revenue needs automatically uploaded into new digital tax accounts. A minority with the most complex tax affairs will be able to manage their account on-line.
Duties
I have no changes to make to the duties on tobacco and gaming already announced. Last year, I cut beer duty for the second year in a row and the industry estimates that helped create 16,000 jobs. Today I am cutting beer duty for the third year in a row – taking another penny off a pint. I am cutting cider duty by 2% - to support our producers in the West Country and elsewhere. And to back one of the UK’s biggest exports, the duty on Scotch whisky and other spirits will be cut by 2% as well. Wine duty will be frozen.
Fuel
I am today cancelling the fuel duty increase scheduled for September. Petrol frozen again. It’s the longest duty freeze in over twenty years. It saves a family around £10 every time they fill up their car
Personal Allowance
In two weeks’ time it will reach £10,600 The personal tax-free allowance will rise to £10,800 next year – and then to £11,000 the year after. That’s £11,000 you can earn before paying any income tax at all. It means the typical working taxpayer will be over £900 a year better off. It will rise from £42,385 this year to £43,300 by 2017-18. So an £11,000 personal allowance. An above inflation increase in the higher rate. A down-payment on our commitment to raise the personal allowance to £12,500 and raise the Higher Rate threshold to £50,000. An economic plan working for you. And in this Budget the rate of the new transferable tax allowance for married couples will rise to £1,100 too. That’s the allowance coming in just two weeks’ time to help over 4 million couples – help that they would take away, but we on this side are proud to provide.
Savings
First, we will give five million pensioners access to their annuity. For many an annuity is the right product, but for some it makes sense to access their annuity now. So we’re changing the law to make that possible. From next year the punitive tax charge of at least 55% will be abolished. Tax will be applied only at the marginal rate. And we’ll consult to ensure pensioners get the right guidance and advice. So freedom for five million people with an annuity.
Second, we will introduce a radically more Flexible ISA. In 2 weeks’ time the changes I’ve already made mean people will be able to put £15,240 into an ISA. But if you take that money out – you lose your tax free entitlement, and so can’t put it back in. This restricts what people can do with their own savings – but I believe people should be trusted with their hard earned money. With the fully Flexible ISA people will have complete freedom to take money out, and put it back in later in the year, without losing any of their tax-free entitlement It will be available from this autumn and we will also expand the range of investments that are eligible.
Third, we’re going to take two of our most successful policies and combine them to create a brand new Help to Buy ISA. And we do it to tackle two of the biggest challenges facing first time buyers – the low interest rates when you build up your savings, and the high deposits required by the banks. The Help to Buy ISA for first time buyers works like this. For every £200 you save for your deposit, the Government will top it up with £50 more. It’s as simple as this – we’ll work hand in hand to help you buy your first home. This is a Budget that works for you. A 10% deposit on the average first home costs £15,000, so if you put in up to £12,000 – we’ll put in up to £3,000 more. A 25% top-up is equivalent to saving for a deposit from your pre-tax income – it’s effectively a tax cut for first time buyers. Access for pensioners to their annuities. A new Flexible ISA.
Today I introduce a new Personal Savings Allowance that will take 95% of taxpayers out of savings tax altogether. From April next year the first £1,000 of the interest you earn on all of your savings will be completely tax-free. To ensure higher rate taxpayers enjoy the same benefits, but no more, their allowance will be set at £500.
