Budget 2015

The Chancellor, George Osborne unveiled his 6^th Budget on the 18^th March.  With less than two months to go until a General Election, the speech was as much about short-term politics and long-term economic planning.  Indeed, with limited Parliamentary time, and a new administration likely to want to outline a new post-election Budget, not all of the policies may be implemented.

 On the overall economy forecasts have improved slightly.  The Office for Budget Responsibility estimates that the UK economy will grow by 2,5% in 2015, up from a figure of 2.4% estimated in December.  Predicted growth for 2016 is 2.3%, as it is for the following two years.  Falling inflation has given the Government an economic bonus (spending categories such as pensions are linked to the inflation rate).  Also borrowing costs are lower than predicted.  Even so, the Government is still forecast to borrow over £75bn in 2015-16.  The initial pledge of the coalition was to have removed the deficit within the lifetime of this Parliament.  It will not be until 2018-19 the UK will run a surplus (of £5.2bn).   Mr Osborne still plans to make £30bn of savings in the next Parliament.  Austerity will not end until 2019-20. With some departments such as Health, Education and Overseas Aid protected, the cuts will fall disproportionately on departments such as DEFRA.

 On specific points;

• The Personal Allowance for Income Tax will rise from £10,000 to £10,600 for 2015-16, and then to £10,800 for 2016-17 and £11,000 the next year.  In a departure from the recent past the Higher rate 40% threshold will also increase – to £42,385 in 2015-16 and then in line with the standard rate threshold
• Farmers ability to average profits will be extended from two years to five years.  This will commence from April 2016 and the details will be published over the course of the years.
• Digital tax accounts will be introduced to remove the requirement for an annual tax return.
• The lifetime allowance for pension contributions will be reduced form £1.25m to £1m next year.  There will be added flexibility for pensions to cash-in annuities.
• The ISA limit will be raised to £15,240.  A flexible ISA will allow savings to be withdrawn during the year and a ‘Help to Buy’ ISA will see the government boost the savings pot of those looking to fund a house deposit.
• The Annual Investment Allowance (AIA) which is currently £500,000 is due to revert to £25,000 after December this year.  The Chancellor stated that it will be set at a ‘more generous rate’ but declined to offer details.
• There will be review of the use of Deeds of Variation (retrospective changes in Wills) as a method to avoid Inheritance Tax.
• The rules on Entrepreneurs Relief for Capital Gains Tax will be tightened-up and clarified.
• A review of the Business Rates system has been announced.
• Plans were announced to make it easier for residential tenants to sub-let rooms by restricting tenancy clauses preventing sub-lets.
• A consultation has been launched looking to reform the compulsory purchase system.
• Announced earlier was a rise in the National Minimum Wage.  The standard rate will increase 3.1% in October to £6.70 per hour.  The Apprentice rate will go up by 57p to £3.30.
• On duties the rate on beer will drop 1p and on cider by 2p.  The planned increase in fuel duty for September is scrapped.
• The Government is looking to introduce a Universal Service Obligation (USO) on broadband providers.  This would guarantee a connection of at least 5Mbps – even in rural areas.
• £11.8m has been pledged under the Agri-tech Strategy for a new Centre for Agricultural Infomatics and Sustainability Metrics.  This will be based at Rothamsted in Hertfordshire.