The Chancellor appeared very pleased with himself as he announced that this government’s long term economic plans have delivered stability and security during tough economic times and as a result the UK has grown faster than any other economy in the G7. Promises to back business and enterprise, to invest in infrastructure and to build a northern powerhouse formed the backbone of the statement delivered.
The personal allowance is set to increase to £10,600 from next April and for the first time in years there will be a real increase in the level of income at which tax is paid at 40%, being £42,385. Recognising the contribution made by top earners the Chancellor acknowledged that the top 20% pay more in tax that the remaining 80%, the greatest burden being borne by those with the broadest shoulders.
George Osborne left perhaps his biggest surprise of the day until last when he announced a radical reform of stamp duty land tax in relation to residential sales to help improve the housing market. Instead of the current stepped system whereby a £1 increase in the price paid for a property can result in a substantial increase in stamp duty as a threshold is crossed, the new system, in operation from tonight, will see a gradual increase so that the higher rate charge is only paid on the slice of proceeds above the threshold. As a result it is claimed 98% will pay lower SDLT.
Whilst there was no mention of the anticipated increase in the IHT nil rate band, changes to the rules on ISAs mean that spouses will now inherit their partner’s ISA account with income tax free status in tact on death. In addition to this the Chancellor did confirm earlier announcements made concerning changes to the taxation of pensions on death including the removal of the current 55% tax charge and the ability for those dying aged under 75 to pass on an annuity tax free.
In a bid to help small businesses in local communities the ‘high street discount’ for around 300,000 shops, pubs, cafes and restaurants will go up from £1,000 to £1,500 from April 2015 for one year. In addition, doubling Small Business Rate Relief will mean that 380,000 small businesses will pay no rates at all.
To help families, children are to be exempt from tax on economy flights and to help the creative sector, tax reliefs are to be extended to children’s TV.
The Chancellor plans to encourage the employment of the young by exempting employers from having to pay NIC for most apprentices aged under 25, this is in addition to the already planned exemptions for the under 21s from next April.
Continuing to encourage learning includes plans to extend income-contingent loans to postgraduate taught masters courses for the under 30s from 2016.
Cracking jokes at the expensive of the other side of the house Mr Osborne announced plans to invest £95m in the next mission to mars on the basis that we don’t really understand the ‘red’ planet. Coupled with promises to build a northern powerhouse with an investment of £7 billion were plans to spend £235m on a science research centre in Manchester, £20m towards a research centre on ageing in Newcastle and promises of an additional £2 billion of funding for the NHS.
So how does the Chancellor plan on funding all of this? Further measures to clamp down on tax avoidance by multinational companies diverting profits abroad through complicated business structures and caps on the amount of loss reliefs claimed by the banks, in addition to caps on benefits, are all part of the plans to achieve the government’s goal of a stronger economy in a fairer society.