Budget 2015: At a glance
Chancellor George Osborne has delivered his sixth annual Budget, in which he introduced flexible ISAs, a personal savings tax allowance, and confirmed a consultation into the re-sale of existing annuities.
Here's all the government's major announcements at a glance.
"Britain is walking tall. We have grown faster than any advanced economy in the world. More people have jobs in Britain than ever before."
"Do we return to the chaos of the past? Today we make that critical choice. We choose the future. We pledge to use whatever additional resources we have to get the deficit and the debt falling."
"We choose economic security....we choose jobs...we choose the whole nation...we choose responsibility...we choose aspiration...we choose families."
"The whole of Britain is going back to work."
"We will use [our] resources to pay down debt."
"Britain is back, paying its way in the world today. Britain is on the right track. We must not fall back."
"We stand for opportunity for all. We are all in this together."
- Will further reduce lifetime allowance from £1.25m to £1m; but this will, from 2018, will be index-linked.
- Confirmation that five million existing pensioners will benefit from the re-sale of annuities.
- Isas to become fully-flexible from Autumn, with tax-free withdrawals allowed.
- New personal savings allowance. First £1,000 of interest you earn on savings will be tax-free (£500 for higher-rate taxpayers) so that 17m people will see tax on savings abolished altogether.
- Help To Buy Isa launched. For every £200 you spend on saving for a property deposit, government will top-up by £50, up to £3,000. This means to save for the average UK house deposit of £15,000, Help To Buy Isa savers need only put aside £12,000.
- Income tax personal allowance of £10,600 in 2015-16, rising to £10,800 next year and £11,000 the year after. Typical working taxpayer over £900 a year better off. 27 million people to benefit. 4m of lowest-paid out of income tax altogether.
- Threshold at which people pay higher-rate to rise above inflation from £42,385 to £43,300.
- Annual self-assessment tax returns to be completely abolished in favour of ongoing digital accounts.
- Fuel duty escalator cancelled.
- No change to tobacco and gaming duties. Beer duty cut by 1p for third year in a row. Cider duty cut by 2%. Scotch whiskey by 2%. Wine duty frozen.
- Share of income tax paid by top 1% of earners will rise from 25% in 2010 to over 27% this year.
- Review into business rates launched.
- Banking sector to make bigger contribution: bank levy raised to 0.2% (raising £900m).
- PPI compensation to become offsettable expense.
- New measures to chase-up corporation tax that is owed.
- IHT deeds of variation to be tackled, following Autumn report into the matter.
- New punishments for tax evaders.
- Britain's GDP grew by 2.6% last year.
- Economic growth (GDP) forecasted to be: 2015, 2.5%; 2016, 2.3%; 2017, 2.3%; 2018, 2.3%; 2019, 2.4%.
- Record number of people (and women) in work. Lowest unemployment claim rate since 1975. Over 1.9 million jobs gained since start of austerity. 1,000 jobs a day created under Osborne's government.
- 80% of jobs are full-time. 80% in skilled occupations. Employment is growing fastest in north-west of England.
- Living standards higher in 2015 than 2010, according to the Office for Budget Responsibility (OBR). Households £900 better off in 2015 than 2010.
- Lowest inflation on record, driven by falling oil prices. Target to be 2%.
- We will lock-in low interest rates, helped by government gilts/bonds.
- New £1 coin, using emblems from all four nations.
- Government will sell £13 billion worth of mortgage assets from Northern Rock and Bradford & Bingley. Will continue exit from Lloyds Bank, selling a further £9 billion of Lloyds shares.
- National debt to fall, as a share of GDP, to original debt target of 80.2% in 2015-16. Falling to 79.8% in 2016-17, then to 77.8% in 2017-18, then 77.4% and 71.6%. Squeeze in public spending to end a year earlier.
- Deficit was 10% of national income when Conservatives took over. Now half that, at 5% in 2015. Will fall to 4% in 2015-16 and 0.3% by 2019-2020.
- Admin costs of central govt down by 40%, [but] quality of public services has gone up. Crime is down 20%. One million more children attend good or outstanding schools. Inequality is down. Child poverty is down. Youth unemployment is down. Pensioner poverty at lowest level ever.
- New funds for charities and for permanent memorials to the Afghanistan and Iraq fallen.
- Nucelar test veterans to be helped financially. More money for spouses of police and fire people who die in service.
- Funds for new Essex & Herts, East Anglian, Welsh and Scottish air ambulances.
- Blood bank charities to have a refund of VAT. Plus £1m for defibrillators.
Transport / infrastructure
- Funding for wifi in public libraries. Ultrafast broadband to reach all homes in Britain.
- New transport strategy for the North. New city deal for Greater Manchester: it will be allowed to keep 100% of growth in business rates. Same deal for Cambridge.
- £100m investment in driverless technology.
- Church repair fund to be more than trebled.
- £7bn transport investment in south west. Plus new rail franchise for inter-city express trains.
- Eight new enterprise zones across Britain, including Plymouth.
- Toll rates on Severn Bridge to be reduced.
Office for Budget Responsibility
Formed in May 2010, the OBR makes an independent assessment of the public finances and the economy, the public sector balance sheet and the long-term sustainability of the public finances. The OBR has four man priorities: to produce two forecasts a year for the economy and public finances, to judge the progress the government has made towards meetings its fiscal targets, to assess the long-term sustainability of the public finances and to scrutinise the Treasury’s costing of Budget measures.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The familiar name given to securities issued by the British government and issued to raise money to bridge the gap between what the government spends and what it earns in tax revenue. Back in 1997, the entire stock of outstanding gilts was £275bn; by October 2010 it had surpassed £1,000bn. Gilts are issued throughout the year by the Debt Management Office and are essentially investment bonds backed by HM Treasury & Customs and considered a very safe investment because the British government has never defaulted on its debts and this security is reflected in the UK’s AAA-rating for its debt. Gilts work in a similar way to bonds and are another variant on fixed-income securities.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.