Wednesday, 16 March 2016

Budget 2016 - initial thoughts










We have now heard George Osborne's latest budget. The trend these days is to leak a few bits and bods and then save a big point. Here are our initial thoughts:



SUGAR TAX
This year's big thing is a sugar tax. This has been asked for many years, and it is fantastic that the Government has finally listened and been brave enough to introduce it. It is delayed for 2 years to allow manufacturers to adjust their products. The tax will be assessed on the volume of the sugar, split into two bands: one for total sugar content above five grams per 100ml, and a second band for more sugary products with more than eight grams per 100ml. Apart from that there was no more detail except it will raise £520m a year, which will all be ploughed into primary school sport. One disappointing bit was that milk based products are excluded.



BEER, CIDER, SPIRITS, WINE AND CIGARETTES
Beer, cider and spirits all had a reprieve, and duty is frozen for another year. Wine and cigarettes both saw an increase. Wine will go up with inflation, but cigarettes will go up 2% above inflation and rolling tobacco 3% above.




SCHOOLS

This was a last minute leak, but school days are extending. The Chancellor announced £1.5billion for secondary schools to bid for to put on an extra hour of sport or arts etc every day. He also announced that every school will be an academy by 2022. Which will effectively put an end to the National Curriculum and National Teachers Pay Scales.
On top of those changes, he announced that compulsory Maths lessons to 18 years old was being looked at, and a very welcome change to the 'fair funding' for schools with an additional £500m.

A final bonus for children was the Libor fines will all be spent on children's hospital services, focussed on Manchester, Sheffield, Birmingham and Southampton.


ECONOMY
Mr. Osborn has been making all sorts of noises to prepare us all for bad news on the economy. Once again the growth forecast has dropped. It was 2.6% in the Autumn Statement and has dropped down to 2.4% now. Unsurprisingly, GDP growth dropped by similar amounts. He did say that the global economy is "materially weaker" and we are not immune, however, the UK will still grow faster than any other major Western Economy. Job growth will continue with a further 1million jobs being created by 2020. Inflation will be 0.7% this year rising to 1.6% next year.

PERSONAL TAX
We were all expecting an increase in the 40% threshold, but the Chancellor announced a larger than expected increase. From 2017 you can earn up to £45 000 before you start paying 40% income tax. At the other end, the personal tax-free allowance is going up to £11500 in 2017 too.

Following the extra taxes placed on second homes in the Autumn Statement, Mr. Osborne has thrown all those owners a bone by reducing Capital Gains Tax from 28% to 20% and from 18% to 10%, which sweetens the deal to sell those homes.

For self-employed people we will see Class 2 National Insurance contributions axed from 2018. Said to save 3 million workers more than £130 per year.

PENSIONS
A hot potato subject this one. It was all over the press in the lead-up to this budget, and then the Chancellor appeared to change his mind. So no real changes other than the lifetime Isa for under 40's, to encourage them to save. The Government will put £1 in for every 4 saved, up to £4000 until they are 50. Annual Isa limit went up by £5000 to £20 000.

BUSINESS
Not as much in this budget as there could have been for business. There was a small reduction in the headline rate of corporation tax, down to 17% by 2020. For small business, there was a change in the small business tax relief. The annual threshold has gone from £6000 to a maximum of £15 000 and the higher rate from £18 000 to £51 000, which should exempt around 600 000 companies.

Anti-tax avoidance and evasion measures to raise £12bn by 2020 - which after the Google and others fiasco is about time. Commercial stamp duty was tweaked as well. 0% on purchases up to £150 000, 2% on the next £100 000 and 5% on everything above £250 000. A new rate of 2% for high-value leases with net present value above £5m.

DISABILITY LIVING ALLOWANCE
A really controversial cut here. The Chancellor announced a reduction of £1.2b for those claiming this allowance. We don't want to get too political here at all, there are a lot of changes going on in this area. Rather than summarise them here, there are details on https://www.gov.uk/dla-ending

OTHER THINGS

There has been announcements galore about new rail lines, Crossrail 2 and HS3. More money earmarked for road improvements in the North of England. £700m for flood defenses in York, Leeds, Calder Valley, Carlisle and Cumbria. A reduction on the Severn River toll, and some badly needed money to try and help people sleeping rough and homelessness. An increase in Insurance Premium Tx is on its way too, which puts an extra £100 on the bill for a house with 2 cars, a pet and medical insurance. Fuel duty was frozen for another year, which does make us wonder whether Mr. Osborne is a bit stuck with this for now. £14million will be spent on a national mentoring scheme to turn around the lives of 25,000 struggling teenagers.



No comments:

Post a comment