Today, the Chancellor, George Osborne, has delivered his first budget under the new Conservative government. Here are the key points:

Budget

  • Personal tax
    • The personal allowance to rise to £11,000 from April 2016 (currently at £10,600). This is to increase to £12,500 by 2020.
    • The threshold for the higher rate of tax (where you pay 40% tax on income) to increase to £43,000 in April 2016 (currently at £42,385)
    • A new national ‘living wage’ will be introduced for all workers over 25 years old, starting at £7.20 per hour form April 2016, and which will rise to £9 per hour by 2020
    • Buy to let homebuyers – the tax relief for Mortgage interest is to be restricted to the Basic rate of tax
    • The permanent “non-dom” tax status to be abolished from April 2017

 

  • Inheritance tax
    • The Inheritance tax threshold to increase to £1m – to be phased in from 2017

 

  • Pensions
    • A Green paper to be published for proposals to overhaul the pensions system
    • The amount people who earn over £150,000 can contribute to their pension schemes, to be reduced

 

  • Benefits and welfare
    • Tax credits and the new Universal Credit to be restricted to two children per family
    • The income thresholds for tax credits to be reduced from £6,420 to £3,850
    • 18-21 year olds will no longer be able to claim housing benefit, and will face an “earn to learn” obligation
    • Benefits including tax credits and housing allowances, to be frozen for four years – except for maternity pay and disability benefits, which are exempt
    • Subsidies for social housing for those who earn more than £30,000 (£40,000 in London) to be phased out

 

  • Fuel
    • No rise in fuel duty this year
    • No mention of duties on alcohol or tobacco

 

  • Business taxes
    • Corporation tax to be cut to 19% in 2017, and to 18% in 2018
    • The Employers National Insurance Allowance to be increased to £3,000 per annum from April 2016
    • The current dividend tax credit system to be replaced by a tax-free allowance for dividend income of £5,000, and new rates of tax for dividend income of 7.5%, 32.5% and 38.1%
    • The Annual investment Allowance to be fixed at £200,000 per annum from April 2016
  • Education
    • Student grants to be replaced with loans, which will be paid back once people earn more than £21,000 a year

 

  • Housing
    • The rent-a-room relief scheme to increase to £7,500 per year

 

  • Defence
    • The government to spend 2% of GDP on defence every year in line with NATO targets