Chancellor of the Exchequer George Osborne has used his summer Budget speech to outline plans to cut taxes for workers and older families, as well as reduce Britain’s benefits bill.
The Conservatives say they will continue the work done by the coalition government in raising the amount of money people can earn before paying income tax. From April 2016 the personal allowance will increase to £11,000, faster than had been planned.
Also from next year, the point at which people will start to pay the higher rate of income tax at 40% will rise to £43,000 from its current level of £42,385. Osborne said this meant around 29 million people would pay less tax.
A national living wage will replace the minimum wage for people aged 25 and older: it will start at £7.20 an hour in April 2016.
But benefits for workers will be frozen for the next four years to save money.
Inheritance tax and property
From 2017, families will be able to pass on property to their dependants worth up to £1 million without paying inheritance tax. At present the tax starts at £650,000 for couples.
Mortgage interest relief for buy-to-let investors is to be limited to 20% rather than the 40% or 45% that some landlords currently benefit from.
And the amount that homeowners can earn tax-free from the government’s rent-a-room scheme is to rise to £7,500 next year from the current £4,250.
Read more about how the Budget will affect inheritance tax and property.
More pension changes loom
Osborne said ministers were considering further changes to the pension system which would affect the way tax relief is applied. These measures are only at the consultation stage, but they could result in pensions being treated like ISAs, with no tax relief on what is paid in but no income or capital gains tax levied on the money taken out.
The government will maintain the “triple lock” on the state pension, which guarantees that payments rise annually in line with inflation, earnings growth or 2.5% — whichever is higher. Free TV licences for the over-75s and the winter fuel allowance will also be protected during the current parliament.
Read more about the pension announcements in the Budget...
Good news for motorists
Osborne said that he would continue the freeze on fuel duty that has been in place since 2011 until the end of this year at least. Reports in the run-up to the speech had suggested the government was considering linking duty rises to inflation.
Vehicle excise duty – colloquially known as road tax – will be reformed from 2017, with the current system that allows brand-new cars to escape VED in the first year scrapped. The money collected in VED will be ring-fenced and used for investment in strategic roads, such as the UK’s motorway network, from 2020.
More news about how the Budget will impact on motorists...