Thursday, 17 March 2016

Less tax for low paid as tax threshold goes up to £11,500, and strong support for small businesses in the budget

The Budget provided some excellent news on tax and business rates:

- Tax on working people will be reduced further by increasing the personal allowance to £11,500
The personal allowance will be 70% higher in April of this year than in 2010-11. All of this, continues to ensure that no-one working 30 hours per week on the National Minimum Wage (NMW) will pay income tax in 2017-18.
In short - a typical basic rate taxpayer will pay over £1,000 less income tax in 2017-18 than in 2010-11: more money in the pockets of everyday working people and out of the hands of the tax-man.
- The higher rate threshold is now £45,000 in 2017-18.

Small-business also received a real boost, as the Chancellor cut the burden on ratepayers in England by £6.7 billion over the next 5 years. Business rates will be cut for all properties and, the smallest businesses will pay no rates at all. This is the key help that small businesses have been asking for locally in Hexham.
Equally, from April 2018, Class 2 National Insurance Contributions will be abolished. This represents an annual tax cut for 3.4 million self-employed people of £134 on average.

Finally, savers have been given a hand-up by George Osborne, with the new Lifetime Individual Savings Account (ISA). Millions of adults under 40 will be able to use the new ISA, to buy a home or provide for a pension, from April 2017. Eventually replacing the Help-to-Buy ISA, savers will receive a 25% bonus from the government, on top of their savings. They will be able to put in up to £4,000 a year, with an annual bonus of up to £1,000 paid until the age of 50. From April 2017 all savers will be able to put up to £20,000 a year into ISAS, a marked increase from the current £15,240 limit.

The Lifetime ISA will be a fantastic boost for anyone under 40, wanting to get on the housing ladder, and will provide a secure, tax free solution for retirement savings. Broadly, the Chancellor’s efforts on ISAs will encourage, and reward people who do the right thing, and save.