Last week, the Chancellor George Osborne announced his final budget before the 2015 General Election, with a variety of changes proposed. He claimed that Britain was ‘walking tall again’ and that living standards would be higher in May 2015 than when the coalition took office in 2010, while the Labour Party accused the Osbourne of hiding a plan to impose ‘colossal’ spending cuts after the next election. But what exactly is planned for the coalition’s last budget and who will these changes benefit?
Perhaps one of the most universal changes announced in the budget was the raising of the tax free personal income allowance to £11,000 by 2017-18 – allowing everyone a higher level of tax free income. The level at which people start paying the top (40p) rate of income tax will also rise to £43,300 by 2017-18.
Other measures that have been announced which will undoubtedly benefit large sectors of the population include the cutting of beer duty by 1p a pint, with cider duty also being cut by 2p a pint. The fact that September’s planned increase in fuel duty has been scrapped will also bring welcome relief to the 80% of UK households that own a car.
The general population will also be benefited by changes to personal savings allowances. Changes include £1,000 interest on savings income to be tax-free for basic rate taxpayers and £500 allowance for 40p tax ratepayers, as well as the introduction of “fully flexible” ISA. This will allow savers to withdraw money and put it back without compromising their tax free allowance.
Pensioners are seen as one of the groups that will benefit most from the new changes, as the budget enacts changes to the ways in which pensions can be obtained, giving pensioners the option to ‘cash in’ annuities that they have already bought. This will mean that they will be able to obtain their pensions as a lump cash sum rather than having a fixed and guaranteed income, creating the potential for the money to be invested elsewhere to potentially create greater return. However, some pensioners will face increased taxation, as from April 2016 the lifetime tax free allowance for pension savings will be cut from £1.25m to £1m.
For business owners, the changes appear to be mainly beneficial, with a review of business rates and a cut in the taxes applied to oil producers. A new tax levy has also been created to encourage investment in the North Sea oil industry. The creation of a tax on ‘diverted profits’, which comes into effect next month, represents an attempt to tackle tax evasion caused by multinational corporations moving their profits offshore.
However, the budget seems to offer little for the student population, with the launch of consultation on proposals to offer loans of up to £25,000 for UK students studying for PhDs and research-based master’s degrees appearing to be the most significant education related proposal.