The Budget 2016 – Key Points
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Personal taxation
- The 40% income tax threshold will rise from £42,385 now to £45,000 in April 2017
- Tax-free personal allowance to rise to £11,500 in April 2017, and £12,500 by 2020
- Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers
- 0.5% rise in insurance premium tax
- Class 2 National Insurance contributions abolished for the self-employed
Business
- Headline rate of corporation tax – currently 20% – to fall to 17% by 2020
- Small business tax relief threshold raised from £6k to a max of £15k, higher rate from £18k to £51k
- Supplementary charge for oil and gas producers to be halved from 20% to 10%
- Petroleum revenue tax to be “effectively abolished”
- Anti-tax avoidance and evasion measures to raise £12bn by 2020
- Use of “personal service companies” by public sector employees to reduce tax liabilities to end
- Commercial stamp duty 0% on purchases up to £150k, 2% on next £100k and 5% top rate above £250k.
- New 2% rate for high-value leases with net present value above £5m. Effective from midnight
The state of the economy
- Building site in central London
- Growth forecasts revised down markedly for next five years
- Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement
- GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, from 2.4% and 2.5% forecast 4 months ago
- Outlook for global economy is “materially weaker” and UK “not immune” to slowdown elsewhere
- The UK still forecast to grow faster than any other major Western economy
- A million jobs forecast to be created by 2020
- Inflation forecast to be 0.7% for 2016, rising to 1.6% next year
Public borrowing/deficit/spending
- Further cuts of £3.5bn by 2020, with spending as a share of GDP set to fall to 36.9%
- Debt targets to be missed. Forecast debt as a share of GDP revised up in each of the next five years to 82.6% in 2016-17 and 81.3%, 79.9%, 77.2% and 74.7% in subsequent years
- Debt to be £9bn lower in 2015-16 in cash terms
- Annual borrowing in 2015-6 forecast to be £72.2bn, £1.3bn lower than forecast in November
- Public finances still projected to achieve a £10.4bn surplus in 2019-2020
- The deficit as a share of GDP is projected to fall to 2.9% in 2016-17, 1.9% in 2017-18 and 1% in 2018-19
Alcohol, tobacco, gambling and fuel
- Fuel duty to be frozen at 57.95p per litre for sixth year in a row
- Beer, cider, and spirits duties to be frozen
- Excise duties on tobacco to rise by 2% above inflation
Health and education
- Introduction of a new sugar tax on the soft drinks industry effective in two years’ time. It is set to raise £520m a year which is to be spent on doubling funding for primary school sport
- The levy will be calculated on levels of sugar in sweetened drinks produced and imported, based on two bands
- Pure fruit juice and milk-based drinks to be excluded
- Plan for all schools in England to become academies by 2022
- Compulsory maths lessons until 18 to be looked at
- £500m to ensure “fair funding” formula for schools in England
Pensions and savings
- Annual ISA limit to rise from £15,240 to £20,000
- New “lifetime” ISA for the under-40s, with government putting in £1 for every £4 saved
- People who save a maximum of £4,000 towards a home deposit or retirement will get a £1,000 top-up from the state every year until they turn 50
- New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years
- The Money Advice Service for consumer advice is to be abolished
Housing/infrastructure/transport/regions/energy/culture
- Powers over criminal justice to be devolved to Greater Manchester and Greater London Assembly
- New rail lines to get go ahead
- More than £230m set aside for road improvements in the north of England/li>
- £700m for flood defences schemes in York, Leeds, Calder Valley and across Cumbria
- Tolls on Severn River crossings between England and Wales to be halved by 2018
- £115m to tackle rough sleeping and homelessness
- Libor bank fines to pay for community facilities in Helensburgh and for naval personnel at Faslane
- New elected mayors for cities and towns in southern England
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