Summer Budget 2015: The winners and losers

9 July 2015
Chancellor George Osborne has outlined his first ‘Blue Budget' and there were some big giveaways for many people - but to pay for them, more cuts were announced too. In delivering his plans to the House of Commons on 8 July, George Osborne said: "This will be a Budget for working people. A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create." Here's our look at who will be the big winners from the Budget and who will lose the most.For a complete recap of the Summer Budget click here THE WINNERS Middle income households and pensionersThey will have less of their income nibbled away by tax thanks to another uplift in the Personal Allowance from the current £10,600 to £11,000 from 6 April 2016. The Treasury says increases to the Personal Allowance since 2010, when it was just £6,475, mean that a typical taxpayer will be £905 a year better off in 2016-17. Meanwhile, middle income households and pensioners will also benefit from an increase in the threshold at which the higher rate of income tax – the 40p rate – kicks in. It rises from £42,385 this tax year to £43,000 in the next one. The government has previously outlined its intention to raise this further, to £50,000, and also improve the Personal Allowance to £12,500 by 2020. The children of married couplesParticularly those with a family home in London and the South East, will be able to inherit their parents estates worth up to £1 million completely free from tax. Currently, inheritance tax (IHT) is charged at 40% on the portion of an estate over the tax-free allowance of £325,000 per person. Married couples and civil partners can pass any unused allowance on to one another. The change announced in the Summer Budget means that from 6 April 2017, each spouse will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death. However, all this will take some time and will be phased in from 2017-18. The full benefit of the £1 million tax-free inheritance will not be had until 2020-21, according to the Treasury. People who use P2P loans as savings vehiclesSavers with money deposited at peer-to-peer loans companies – whose money is used to make loans to borrowers - will be able to protect the interest they earn from tax for the first time through the new Innovative Finance Isa. Low-earners over the age of 25This group is set to benefit from the introduction of the compulsory National Living Wage. It will be £9 an hour from 2020 but from April next year begins at the lower £7.20 - 70p above the current National Minimum Wage and 50p above the increase in the minimum wage due to come into effect in October 2015. People who use claims management firmsThey stand to benefit from a government investigation into the industry as well as a cap on charges that significantly erodes the amount of compensation awarded. Disabled peopleThey will receive their disability benefits free of tax and they won't be means-tested; although Disability Living Allowance, Attendance Allowance, Carer's Allowance and Incapacity Benefit are all within the scope of the new proposed ‘welfare cap'. Working parentsThey will get access to more free childcare from September 2017, when they will receive up to 30 hours a week for three- and four-year-olds – this is double the 15 hours they can currently claim. Social housing tenantsWill see their rent reduced by 1% a year for four years. Homeowners taking lodgersAnd those renting rooms short term through the likes of Airnbnb can now make more money a year without having to pay tax. The amount will rise to £7,500 a year tax-free under the Rent a Room Scheme. Previously a householder could only earn up to £4,250 a year tax free. THE LOSERS People on benefitsWelfare claimants will see their incomes squeezed further with the benefits cap being reduced from £26,000 to £20,000 (£23,000 in London) – presuming MPs give the proposal the go ahead when they are asked to vote on it. Employment and Support Allowance will also be reduced for some claimants and working-age benefits (excluding maternity pay) would be frozen for four years. Big families with three or more childrenWill no longer receive tax credit support as this is to be limited to two children. This means that any further children born after April 2017 won't be eligible for support. The only exception is if further children are the result of twins, triplets or other multiple births. In addition, those starting a family after April 2017 will no longer be eligible for the Family Element in tax credits. The equivalent in Universal Credit (the successor to tax credits), known as the first child premium, will also not be available for new claimants after April 2017. Those who already have large families and receive tax credits won't be affected by the new rules. Higher earners paying into a pensionThe amount people with an income of more than £150,000 can pay tax-free into a pension will be reduced from the current £40,000 level. The new limit is yet to be confirmed as the government plans to consult with the pensions industry "on a radical overhaul of tax relief on pensions", said the Treasury.One consideration will be whether pension contributions could be paid from taxed income – but with no tax paid when savings are cashed in. In return, tax relief would no longer be offered on contributions. DriversDespite duty being frozen for the rest of the year, drivers will be hit by a double whammy of updated Vehicle Excise Duty (VED) bands for new cars from 2017 and a rise in insurance costs. From 2017, new cars will pay a flat standard rate of VED of £140 a year, regardless of emissions, except for the first year when they will face VED of between £0 and £2,000 depending on emissions. Owners of more expensive new cars – with a list price above £40,000 - must also have to fork out an extra £310 a year for the first five years. Meanwhile, the government is also increasing the standard rate of Insurance Premium Tax from 6% to 9.5% in November 2015, affecting many types of insurance (except travel, which is already taxed at 20% and life insurance, which is exempt). said drivers and households across the country will see their home and car insurance premiums "rocket by almost 60% from November", adding £35 to insurance bills for the average two-car family. Wealthy buy-to-let investorsWill only be able to offset mortgage interest at the basic-rate rate of tax, whereas now tax is charged in line with their normal income tax banding – allowing higher rate taxpayers to offset their mortgage interest at 40% (and additional-rate taxpayers, 45%). "To help people adjust, we will phase in the withdrawal of the higher rate reliefs over a four year period, and only start withdrawal in April 2017," said the chancellor. Osborne also announced that from April 2016, the existing 'wear and tear allowance', which lets landlords reduce the tax they pay, whether or not they replace furnishings in their property, will also be replaced. In its place will be a new system that only allows them to get tax relief when they actually do replace furnishings. StudentsThe government is to replace maintenance grant of up to £3,387 with loans of up to £8,200, hitting around 500,000 students from poorer backgrounds. The loans will have to be repaid once graduates begin earning £21,000 a year. Sir Peter Lampl, chairman of the Sutton Trust and of the Education Endowment Foundation, told the BBC the move could put off many low and middle income students from going to university. Osborne also said tuition fees could rise in line with inflation, potentially saddling students with even more debt. Public sector workersThey will only receive a 1% pay rise in each of the next four years, meaning they will effectively be getting a pay cut as soon as inflation exceeds 1%. People receiving (or paying themselves) dividendsThe majority (85%) of people who are paid dividends from their investments (or pay themselves in company dividends) will benefit from a new annual £5,000 tax-free dividend allowance. However, the remaining 15% should expect to pay more in tax.

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