2014 Budget Highlights – Growth up – Deficit Down
I have sat here watching the Budget delivered by a slightly thinner ‘Gideon Oliver Osborne’ (also known as George!) and have to say I am slightly impressed. For once, they are looking towards simplification of taxes and relaxation of central control and have targeted savers and people in retirement or nearing retirement as a way of looking towards the election in 2015.
As regards to some of the detail, it is no wonder that he is happy when the Office of Budget Responsibility (OBSR) has upgraded UK annualised growth from 1.8% to 2.7% in 2014. Overall, the economy is forecast to be larger than it was before the collapse in 2008. Mr Osborne says this is “the biggest upward revision to growth between Budgets for at least 30 years”.
As a result, they are seeing the fastest reduction in youth unemployment and the UK government is forecasting unemployment to be as low as 5% by the end of the next parliament. The net result of all this growth is that the government is forecasting borrowing to be wiped out by the end of the next parliament.
More importantly though for the private individual the summary of tax changes are as detailed below:-
- The highly popular Individual Savings Accounts (ISAs), currently being cash and stocks and shares ISAs, will be merged into one New ISA. The annual limit for saving in an ISA will be raised to £15,000.
- Defined contribution pensions will see big changes to the tax rules governing them. The income requirement for flexible drawdown will fall from £20,000 to £12,000; the capped drawdown limit will rise from 120% to 150% and people taking an income from their pensions will have more flexibility as regards to how much they can draw from the pension, with that income subject to tax at the individual’s marginal rate rather than fixed at 55%, if income is taken above prescribed limits. Also, the size of the lump sum small pot will rise five-fold to £10,000 and the total pension savings you can take as a lump sum will almost double to £30,000, if that is the value of your total pension savings.
- New Pensioner Bond available to anyone aged over 65; Mr Osborne says “The exact rates will be set in the autumn, to ensure the best possible offer – but our assumption is 2.8% for a one year bond and 4% on a three year bond.” They will be limited to £10bn and restricted to £10k per person.
- Premium Bonds will be increased from £30k maximum to £50k per individual progressively and the number of £1m draws will be doubled.
- The nil rate standard Income Tax allowance is to be increased to £10,500 and that increase will track up through the tax allowances so everyone benefits from it.
- Emergency workers will be exempted from Inheritance Tax whilst in service.
- Savers are allowed to earn £5,000 per annum in interest and pay no tax as the 10p tax rate has been abolished and the savings rate increased to £5,000. Overall therefore, savers can earn £15,500 from 2015/2016 and pay no tax on that income if derived from deposit interest and pension income at the perfect split.
- The Childcare Policy of giving all those with children under 12 and with income below £150k each up to £2,000 per child towards childcare costs.
- The Help to Buy Scheme has been extended to the end of the decade, which with other schemes will mean a further 200,000 new homes being built over the next five years.
- Anti-avoidance Schemes are being targeted and Anti-avoidance Measures are being tightened and they expect to raise an extra £4bn by focussing in on this area.
- The fuel escalator has been frozen again.
- If you play Bingo the tax has been halved to 10% and for fixed odds betting, the tax on terminals has been increased to 25%.
- Class 2 NI will be removed and paid via Self Assessment.
- The government is looking to help support exporters with financing to support cash flow.
- They are also looking to spend £7bn by focusing on energy savings measures for manufacturing business to secure UK jobs and improve competitiveness by reducing variable overheads relating to energy in businesses.
- Seed Enterprise Investment Scheme (SEIS) is being made permanent.
- The annual investment allowance for business has been doubled to £500k and extended to the end of 2015 to drive investment in business machinery.
- Grants are being made available for businesses to create a further 100,000 apprentice positions that will be equal to a degree.
Overall we feel the economy is in a good position and is moving steadily out of recession into recovery, noting that there are still weaknesses in areas of the economy and there is no doubt that in 2015 when interest rates start to rise, there will be a slow down. Overall though, we endorse the pension and ISA changes and believe that for the saver and pensioner this Budget is good.
What the populous now need is an improving economy and some wage inflation with low inflation so the costs of living starts to be less of an issue.
We hope the above is a good snapshot of what has been said and will over the coming 24 hours complete and publish our full Budget report. As always, if you have any questions please contact a member of the team immediately, noting for most, the news today is good news.
On a final note as a drinker of fine beer I fully endorse the reduction in duty on beer by 1p and that will be a cheer to all. Well Done George and may you continue to get thinner and easier on the eye!
CEO & Founder