Chancellor George Osborne spoke for just over an hour yesterday to reveal the latest Budget details. The key announcements are below:
Lifetime Isa is unveiled: The large rabbit out of the hat from Osborne, the Lifetime Isa sees people under the age of 40 able to contribute up to £4,000 each year, with each individual getting a 25 per cent, or a maximum £1,000, bonus from the government. Individuals can continue saving until they reach the age of 50.
Savers will be allowed to use the money either to buy their first home or to save for their pension. Money can be withdrawn at any time, subject to a 5 per cent charge and forfeiting any interest or growth and the government’s bonus, says Osborne.
However, the move was branded a “gimmick” by some in the industry, who also said the move will harm the pensions industry and could create confusion in the Isa space.
Money Advice Service is scrapped: The Money Advice Service has been scrapped, with its pension guidance remit going to a new provider. The government also admitted that the name of the service was “misleading” to consumers because it does not offer regulated advice.
Stamp duty exemption rules out for corporate buy-to-let investors: The Government ruled out a exemption to the new 3 percentage point raise in stamp duty for corporate investors. The industry had been waiting on the outcome of a consultation on the exemption, announced in the 2015 Autumn Statement. The new stamp duty rates come into effect on 1 April.
Capital Gains Tax is cut to 20%: Osborne cut CGT from 28 per cent to 20 per cent. For basic rate taxpayers, CGT will fall from 18 per cent to 10 per cent. The changes will occur in three weeks’ time.
Stamp duty is reformed for commercial properties: Residential house buyers were given a boost in 2014 with the removal of the ‘slab’ system for stamp duty tax, but commercial property buyers were left with the old system. However, the Chancellor has now brought commercial property into the new system. The change means that when a purchase passes a tax threshold, the higher rate applies to just the part that passes the threshold.
Isa limit is increased: The Isa limit will increase for everyone from the current £15,240 limit to £20,000 from April next year.
Corporation tax is cut to 17 per cent: Corporation tax will fall to 17 per cent in 2020 from its current 20 per cent rate. The tax was already due to fall to 19 per cent in April 2017 and 18 per cent by 2020, but this has now be accelerated.
UK GDP growth expectations are slashed: Alongside the Budget the Office for Budget Responsibility released its report on the UK outlook and has cut the GDP growth rate for this year to 2 per cent. The cut is down from the 2.4 per cent predicted in November’s Autumn Statement, which was an upgrade from last year’s budget when the OBR forecast a growth rate of 2.3 per cent for 2016 and the following two years.
OBR warns about Brexit risks: The Office for Budget Responsibility said its growth forecasts are based on the UK staying in the European Union and warned that a vote to leave could usher in economic uncertainty. The organisation warned that Brexit could have “negative implications for business and consumer confidence leading to greater volatility in financial and other assets”.
Small businesses rate relief ‘more than doubles’: Chancellor George Osborne is “more than doubling” the small business rate relief from 50 per cent to 100 per cent. The chancellor said 600,000 small businesses would pay no business rates at all from next year and 250,000 have their rates cuts.
Personal allowance and higher rate tax thresholds rise: From next April both the personal allowance and the threshold for the higher rate of income tax will increase. The personal allowance will rise to £11,500 by next April. The threshold at which employees pay the higher 40 per cent rate of income tax will move from £42,385 to £45,000.