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Budget 2015

George Osborne has delivered his sixth Budget as chancellor, and the last of the current Parliament. Here is a summary of what was announced.

The state of the economy

  • UK grew 2.6% in 2014, faster than any other advanced economy but lower than 3% predicted in December
  • 5% growth forecast in 2015, up from 2.4% predicted in December, followed by 2.3%, 2.3%, 2.3% and 2.4% in the next four years
  • Record employment in the UK, with unemployment rate to fall to 5.3% this year
  • Living standards “higher” than in May 2010, according to OBR data, with households better off by an average of £900 in last five years
  • Inflation projected to fall to 0.2% in 2015

Business

  • The government is increasing the rate of the bank levy to 0.21% from 1 April 2015
  • Tax on “diverted profits” to come into effect next month, aimed at multinational firms moving profits “artificially offshore”
  • To encourage further investment in the North Sea, the government will introduce a new Investment Allowance and reduce the supplementary tax charge on oil and gas companies from 30% to 20%, while petroleum revenue tax will fall from 50% to 35% from 1 January 2015
  • Automatic gift aid limit for charities to be extended to £8,000
  • Farmers allowed to average incomes for tax purposes over five years

Public borrowing/deficit/spending

  • By 2014-15, the deficit is forecast to have fallen by half, from 10.2% at its peak in 2009-10, to 5% in 2014-15.
  • In 2018-19, the government will have a surplus (will raise more in taxes than is being spent) of £5.2 billion
  • Additional £30bn savings needed in next Parliament
  • Public spending squeeze to end a year earlier than planned in 2019-2020, with spending from then to grow in line with total economic growth
  • Welfare bills set to be an average of £3bn lower each year than predicted in December, and interest charges on government gilts £35bn lower

Health and education

  • Consultation on proposal to offer loans of up to £25,000 for UK students studying for PhDs and research-based master’s degrees.
  • Mental health services to get £1.25bn in extra funding

Personal taxation and pay

  • The tax-free personal allowance – the amount people earn before they have to start paying tax – will rise to £10,800 in 2016-17, and £11,000 the year after
  • The government will also increase threshold at which higher earners start paying 40% tax by £315 in 2016-17, and by £600 in 2017-18 – taking it to £43,300 in 2017-18
  • Annual paper tax returns will be abolished and replaced by digital accounts
  • Transferable tax allowance for married couples to rise to £1,100
  • Class two national insurance contributions for self-employed to be abolished in next Parliament

Pensions and savings

  • The lifetime allowance for pension savings that can be accumulated free of tax will be cut from £1.25m to £1m from April 2016, saving £600m annually
  • From April 2016 people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%
  • Widows of police officers and firefighters who choose to marry again will have their existing pensions protected
  • From April 2016, a tax-free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings
  • Annual savings limit for ISAs increased to £15,240
  • People will have complete freedom to take money out of an ISA and put it back in later in the year
  • Introducing the Help to Buy ISA – every £200 people save towards their first home, the government will put in an extra £50, up to a maximum bonus of £3000

Other Key budget announcements

  • Cancelling the fuel duty increase scheduled for September
  • 2% cut for spirits and most ciders, and a freeze on duty on wine
  • The government is investing up to £600 million to deliver better mobile networks
  • The government will consult on a tax relief for local newspapers
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