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Budget 2016

George Osborne has delivered his 8th Budget as chancellor. Here is a summary of what was announced.

The state of the economy

  • Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement
  • GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago
  • A million jobs forecast to be created by 2020
  • Inflation forecast to be 0.7% for 2016, rising to 1.6% next year

Business

  • Corporation Tax will be cut again to 17% by 2020
  • Annual threshold for 100% relief on business rates for small firms to rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000, exempting 600,000 firms
  • Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments
  • The government will raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures
  • Petroleum revenue tax to be “effectively abolished”
  • Crackdown on foreign firms selling products online in UK without paying VAT
  • New stamp duty 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
  • New 2% stamp duty rate on leases with a net present value over £5 million

Public borrowing/deficit/spending

  • Further £3.5 billion of savings from departmental spending in 2019-20
  • Annual borrowing in 2015-6 forecast to be £72.2bn, £1.3bn lower than forecast in November
  • Public finances still projected to achieve a £10.4bn surplus in 2019-2020
  • Borrowing forecasts revised up to £55.5bn (+£5.6bn), £38.8bn (+£14bn) and £21.4bn (+16.8bn) in 2016-7, 2017-8 and 2018-9 respectively

Health and education

  • A new sugar tax on the soft drinks industry to be introduced in two years’ time, raising £520m a year to be spent on doubling funding for primary school sport in England
  • Secondary schools in England to bid for £285m in new funding for extra after-school activities like sport and art
  • A longer school day for 25% of secondary schools
  • Every school will be an academy by 2022 

Personal taxation

  • The point at which people pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017
  • Tax-free personal allowance, the amount of income you can earn before you start paying Income Tax, will rise to £11,000 in 2016, and will increase further to £11,500 in April 2017
  • 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%
  • Insurance premium tax to rise from 9.5% to 10%
  • Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018

Pensions and savings

  • The total annual ISA limit will be increased from £15,240 to £20,000 from April 2017
  • From April 2017, adults under 40 will be able to open a new Lifetime ISA and save up to £4,000 each year, also savers will receive a 25% bonus from the government on the money saved
  • New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years

Other Key budget announcements

  • Fuel duty to be frozen at 57.95p per litre for sixth year in a row
  • Beer, cider, and spirits duties to be frozen
  • Inflation rise in duties on wine and other alcohol
  • Excise duties on tobacco to rise by 2% above inflation
  • New rail lines to get green light, including Crossrail 2 in London and the HS3 link between Manchester and Leeds
  • More than £230m earmarked for road improvements in the north of England

New tax relief for museums to boost temporary and touring exhibitions

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