Budget 2014: Key announcements

19th March 2014

Taxation
Point at which people start paying income tax will be raised to £10,500.
Bingo duty will be halved to 10%.
Threshold for 40p income tax to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year
Inheritance tax waived for members of emergency services who give their lives in job
Tax on homes owned through a company to be extended from residential properties worth more than £2m to those worth more than £500,000
All long-haul flights to carry lower rate of air duty currently charged on flights to US

Savings/Pensions
Cash and shares Isas to be merged into single New Isa with annual tax-free savings limit of £15,000 from 1 July
The 10p tax rate for savers abolished
All tax restrictions on pensioners' access to their pension pots to be removed, ending the requirement to buy an annuity
Increase total pension savings people can take as a lump sum to £30,000

Fuel, Alcohol and Tobacco
Beer duty cut by 1p a pint
Duty on ordinary cider frozen
Fuel duty rise planned for September will not happen
Tobacco duty to rise by 2% above inflation

State of the economy
GDP forecast to grow by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018

Coinage
Twelve-sided £1 coin to be introduced in 2017

Welfare cap
Budget to be capped at £119bn for 2015-16

Public borrowing/deficit
Deficit forecast to be 6.6% of GDP this year, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19
Borrowing forecast to be £108bn this year and £95bn next year, leading to a surplus of almost £5bn in 2018-19
A new charter for budget responsibility to be brought in this autumn
Promises to make permanent £1bn reduction in government department overspends

Business
Lending for exporters doubled to £3bn and interest rates on that lending cut by a third
Business rate discounts and enhanced capital allowances in enterprise zones extended for three years

Housing/infrastructure
Help to Buy equity loan scheme extended to 2020
Support for building of more than 200,000 new homes
£270m guarantee for Mersey Gateway bridge
Legislation to give Welsh government tax and borrowing powers to fund infrastructure needs, including improvements to M4
£140m extra for flood defence repairs and maintenance
£200m made available to fix potholes

Chancellor George Osborne has delivered his Budget Statement to Parliament, setting out how the government will take further action to secure the recovery and build a resilient economy.

The government is taking decisions that will support businesses to invest, export, and create jobs – laying the foundations for sustainable economic growth. This Budget sets out the most radical reforms to saving for a generation, providing security for families to plan for their future. And it reduces taxes for hardworking people, while taking further steps to tackle tax avoidance.

The government’s long-term economic plan has protected the economy through a period of uncertainty and provided the foundations for the recovery. The economy is now growing faster than predicted and expectations for growth this year and next have also been revised up by the Office for Budget Responsibilty (OBR) – to 2.7% in 2014 and 2.3% in 2015. A record number of people are in work and the OBR now expects employment to reach 31.4 million by 2018. A deficit that reached 11% of GDP in 2009-10 is now forecast to fallen by half to 5.5% in the coming year and will be eradicated by 2018-19.

However, as the Chancellor outlined in his speech the job is not yet done, and further difficult decisions will be needed to continue reducing the deficit and debt.

This Budget sets out further detail on how the government will: * deliver economic stability and sound public finances * help businesses to grow * help savers at every stage of their lives * support families and communities.

In order to continue to reduce the deficit and debt, and secure the recovery. The government will cap the welfare budget to control spending, ensure that employers are meeting the full costs of public service pension schemes and limit public sector pay increases.

A Budget for business
Budget 2014 announces the government will help British businesses by:

doubling the annual investment allowance to £500,000 until the end of 2015
offering the best export finance in Europe
reducing energy costs, to ensure that the UK remains a competitive location for manufacturing

This Budget announces radical measures to help savers at all stages of their lives and to give people greater freedom over how they access their pension savings. This Budget:

introduces the most fundamental change to the way people access their pensions in almost a century
supports households to save through a package of measures including reforming the ISA into a New ISA (NISA) with a significantly higher annual limit and cutting savings tax

Taxes

The government is taking further action to help families keep more of what they earn and to save for their retirement. The government will:

reduce taxes by increasing the level of the tax-free personal allowance further, from £10,000 to £10,500 in April 2015
cut the duty on beer by 1 penny a pint, freeze duty on cider and spirit and abolish the above inflation duty escalator for wine
increase the maximum Tax-Free Childcare support available to £2,000 per year for each child
help a further 120,000 households purchase a home by extending the Help to Buy: equity loan scheme to March 2020
reduce the cost of long haul flights by abolishing the top two bands of Air Passenger Duty
provide £140 million of new funding to repair flood defences that have suffered damage in the recent severe flooding, and provide £200 million to establish a potholes challenge fund

During tough economic times we want a simpler, fairer tax system that supports those on low and middle incomes while making sure that those who can best afford it make a fair contribution.

Actions
In the 2013 Budget, we announced - in support of a simpler, fairer tax system - the following actions:

the personal allowance will be increased by £560 to £10,000 in 2014 to 2015. By April 2014, 2.7 million low-income people under 65 will have been lifted out of income tax altogether
businesses and charities will be entitled to a £2,000 per year employment allowance towards their employer National Insurance Contribution bill, from April 2014, to reduce the cost of hiring staff
a new tax-free childcare scheme will be phased in from 2015, so that working families can pay for childcare effectively tax-free
the fuel duty increase that was planned for 1 September 2013 will be cancelled to support motorists and businesses – fuel duty will have been frozen for nearly 3 and a half years, with pump prices 13p per litre lower from April 2013 than under previously announced plans
the beer duty escalator will be cancelled and general beer duty cut by 2% from 25 March 2013
married couples and civil partners where neither is a higher rate taxpayer will be allowed to transfer some of their income tax personal allowance to their spouse - worth up to £200 in 2015 to 2016
We are also helping local authorities in England freeze council tax by providing grants.

Background
The government’s principles for the tax system are:

taxes should be efficient and support growth
taxes should be certain and predictable
taxes should be simple to understand and easy to comply with
the tax system should be fair, reward work, support aspiration and ask the most from those who can most afford it
In March 2010 we set up the Office for Tax Simplification (OTS) to provide the government with independent advice on simplifying the UK tax system. The OTS has since conducted reviews of different aspects of the tax system, including tax reliefs, small business tax simplification, taxation of pensioners and employer share schemes.

The government has responded to the OTS reviews of pensioner taxation and unapproved employer share schemes.

Pensions
The Chancellor set out that by removing the effective requirement to buy an annuity, people will have greater flexibility in accessing their pensions.

This means that people can choose how they access their defined contribution pension savings; for example they could take all their pension savings as a lump sum, draw them down over time, or buy an annuity.

Alongside this, the government is introducing a new requirement for pension providers to make sure that everyone retiring with a defined contribution pension pot receives free and impartial face-to-face guidance on the choices they face when deciding how to use their retirement savings.

The government has today published a consultation on how best to implement these changes, which will be introduced from April 2015.

In the meantime, as a first step towards this reform, the Chancellor has announced a number of changes to the current rules that will come into effect from 27 March 2014. This will allow people to have greater freedom and choice now over accessing their defined contribution pension savings at retirement. These are:

reducing the amount of guaranteed income people need in retirement to access their savings flexibly, from £20,000 to 12,000
increasing the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000
increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity
increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000 and increasing the number of personal pots that can be taken under these rules from two to three

To see more details on the budget go to
https://www.gov.uk/government/news/budget-2014-key-announcements