During March, Chancellor of the Exchequer George Osborne delivered his third Budget in 12 months. If you’re wondering what’s changed and how it may affect you, here are the headlines:
The amount of income people can earn before they start paying income tax is rising. From April this year, the personal allowance threshold will rise to £11,000 for basic rate taxpayers and to £43,000 for higher rate taxpayers (20%). The basic rate will increase again in April 2017 to £11,500 and £45,000 for higher rate.
By 2020-21, the Conservative government has promised to raise personal allowance to £12,500 and pledged to increase the threshold for higher rate taxpayers to £50,000.
Fuel duty will be continue to be frozen for the sixth year in a row following its last increase in January 2011.
Insurance Premium Tax
While motorists will be pleased with a continued freeze in fuel duty, Insurance Premium Tax will rise. The premium rose in November from 6% to 9.5%, adding on average £13 to comprehensive insurance policies, and the Chancellor has announced it will rise again to 10%.
Investors with more than fifteen properties will also pay the 3% stamp duty surcharge.
ISA, or Individual Savings Accounts, already exist in various forms and provide a tax-free savings account. From April 2017, those under 40 will be able to save up to £4,000 each year into the new Lifetime ISA and receive a 25% contribution each year from the government too. In other words, for every £4 you save, the government will add an extra £1.
The ISA will continue to be topped up until the saver is 50 and can be accessed for a few specific purposes: a first home of up to £450,000, if the saver has terminal ill-health condition, or from the age of 60.
Essentially, the government initiative provides young people with the opportunity to save for a house or for a pension. It also means employees can save with this kind of ISA, with a government top-up, or continue with a traditional pension and an employer top-up, or both.
The annual ISA limit for regular ISAs for all age groups will rise from £15,000 to £20,000.
Day to Day Spending
In two years’ time, a sugar levy will be introduced. The levy will be applied to fizzy drinks, which may influence the sugar content however it could also add costs for the consumer.
A tax freeze will apply to several alcoholic drinks, including beer, cider, whisky and other spirits. Wine and other alcohol will increase in line with inflation.
Tax duty on tobacco will increase at 2% above inflation.