Budget 2016 roundup
So, gorgeous George delivered another (his 8th) Budget to the house at lunchtime today. It was more interesting than many with a few surprises up his sleeves. Here's a round up of the main points affecting you:
Duties and sin taxes
Oil prices have fallen so some cynics surmised that George might take advantage of the lower prices to put up fuel duty, which has been frozen for the past 5 years. Fortunately he refrained from doing so and fuel duty remains frozen. Similarly, he credits himself with saving the UK pub industry and has also frozen duty on beer and cider and some spirits. Other alcohol duties, including wine, will go up in line with inflation. Cigarette and tobacco duties are up by inflation plus 2% or 3%.
However, there is a new baddie in town- sugar. Although we've heard grumblings for a while, sugar tax is now A Thing, although it is sugary drinks upon which the Chancellor has set his sights. A new sugar levy will be charged on drink producers who make drinks with more than 5%/100ml or 8g/100ml, although pure juice and milk drinks, as well as the smallest producers will be exempted. He noted that, while this is a tax on the company, not on the consumer, that some "may choose" to pass on the cost to consumers- a fact about which he is unbothered as an increased price will presumably affect consumption. Which is part of the point. The money raised will go to primary school sports and secondary after-school activities.
Insurance premium tax will also go up by 0.5% to pay for more flood defences.
Capital Gains Tax
In a surprise move, the Chancellor cut the rates of CGT for both basic and higher rate taxpayers down from 18%/28% to 10%/20%. However, in a further blow for very much beleaguered landlords, the old rates will continue to apply to sales of residential property (people selling their own home will normally get relief from CGT as it's their main residence). This is a deliberate move to "encourage investment in businesses rather than in property".
Income tax and savings
We already know that the personal allowance (amount you can receive in income before paying tax) is going up to £11,000 from 6 April. However, from April 2017, the Chancellor announced a further rise to £11,500 and an increase in the higher rate tax threshold such that anyine earning £45,000 or less will not pay 40% tax from next year.
He also announced changes to ISAs- although it's a separate debate as to whether cash ISAs will have any value for many people following the changes to the taxation of savings- the annual contribution limit will be increased to £20,000 and he introduced a new Thing called a Lifetime ISA.
Only available to those age under 40 in April 2017 (a shame for those just recently turned 39), the new scheme will add 25% to your savings if you save up to £4,000 per annum in one of these accounts. However, you can only withdraw your money when either buying your first home (provided it's worth up to £450,0o0) or when you reach age 60.
The scheme will be available for people aged between 18 and 50, so this means that people who save the maximum each year will receive a £1,000 bonus each year from the government, and over their lifetime, savers will be able to have contributions of up to £128,000 matched by the government for a maximum bonus of £32,000, with investment growth on both their contributions and the government bonus.
It's not a bad thing at all, and coupled with the sigh of relief as he left pensions alone, recognises the fact that many people find pensions too complicated, and that a significant number of people already use ISAs in a similar way to pensions, so this new thing (handy pretty picture diagram below) is a hybrid of the two. Note that the age at which you can get your cash from a lifetime ISA (60) is higher than the age at which you can access pension money (55). But still way younger than the age at which state pensions kick in...