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Summer Budget 2015

George Osborne has delivered his 7th Budget as chancellor and first for the conservatives majority since 1997. Here is a summary of what was announced.

The state of the economy

  • Economy grew by 3% in 2014
  • 4% growth forecast in 2015, 0.1% lower than predicted in March, followed by 2.3%, 2.4% and 2.4% in the following years
  • One million extra jobs predicted to be created by 2020

Business

  • Corporation Tax will be cut to 19% in 2017 and 18% in 2020
  • From April 2017 permanent non-dom status will be abolished, anyone who has lived in the UK for 15 of the past 20 years will pay same level of tax as other UK citizens, raising an estimated £1.5bn
  • £7.2bn expected to be raised from clampdown on tax avoidance and tax evasion with HMRC budget increased by £750m
  • Bank levy rate to be gradually reduced over the next six years and a new 8% surcharge on bank profits introduced from 2016
  • The standard rate of Insurance Premium Tax will increase to 9.5% from November
  • New apprenticeship levy for large employers
  • Climate Change Levy exemption for renewable electricity to be removed
  • National Insurance employment allowance for small firms to be increased by 50% to £3,000 from 2016
  • Dividend tax credit will be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax to be set at 7.5%, 32.5% and 38.1%.
  • Annual investment allowance will be fixed permanently at £200,000 from January 2016

Public borrowing/deficit/spending

  • Deficit to be cut at same pace as during last Parliament – reaching a budget surplus a year later than planned in 2019-20
  • Spending to be £83.3bn higher up to 2020 than projected before the election
  • Borrowing set to fall from £69.5bn this year to £43.1bn, £24.3bn and £6.4bn before reaching a £10bn surplus in 2019-20
  • Public sector pay will increase by 1% a year for 4 years from 2016-17
  • 37bn of further spending cuts by 2020, including £12bn of welfare cuts, £5bn from tax avoidance and a £20bn reduction in departmental budgets

Health and education

  • Student maintenance grants will be replaced with loans, that will be paid back only when graduates earn above £21,000 a year
  • Cash support for new students will increase by £766 to £8,200 a year
  • New university professorships to be created to mark the Queen’s 90th birthday
  • NHS will receive a further £8bn by 2020, in addition to the £2bn already announced)

Personal taxation and pay

  • From April 2016, a National Living Wage will be increased to £7.20 an hour for those aged over 25 and set to rise to over £9 an hour by 2020
  • Low Pay Commission to advise on future changes to rates
  • Inheritance tax threshold to increase to £1m, phased in from 2017, underpinned by a new £325,000 family home allowance
  • The tax-free Personal Allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016 and ambition to increase it to £12,500 by 2020
  • he higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17
  • Mortgage interest relief for buy-to-let homebuyers to be restricted to basic rate of income tax

Welfare, pensions and savings

Support through Child Tax Credit will be limited to 2 children for children born from April 2017

Income threshold for tax credits to be reduced from £6,420 to £3,850

Working-age benefits, including tax credits and Local Housing Allowance, will be frozen for 4 years from 2016-17 (this doesn’t include Maternity Allowance, maternity pay, paternity pay and sick pay)

Rents for social housing will be reduced by 1% a year for 4 years, and tenants on higher incomes (over £40,000 in London and over £30,000 outside London) will be required to pay market rate, or near market rate, rents

Disability benefits will not be taxed or means-tested while state pension triple lock to be protected

The amount people can contribute to their pension tax-free will be reduced for individuals with incomes over £150,000

The household benefit cap will be reduced to £20,000 (£23,000 in London)

Other Key budget announcements

  • Government to spend 2% of GDP on defence every year, meeting NATO target
  • No rise in fuel duty this year with rates continuing to be frozen
  • Major reform to vehicle excise duties to pay for a new road-building and maintenance fund in England
  • New VED bands for brand new cars to be introduced from 2017, pegged to emissions for the first year. Subsequently, 95% of car owners will pay a flat fee of £140 a year

Alcohol and tobacco duties not mentioned in statement

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