Today (8th July), Chancellor George Osborne addressed House of Commons and the public with the first Conservative budget in 20 years. Many were expecting to hear about major cuts in welfare and a further crackdown on tax avoidance among other plans. Most notably, it was announced the national living wage would increase to £9 per hour by 2020.
While the economy is continually improving (up 3% in 2014), Osborne stressed the government is committed to tackling the deficit and therefore has to make major cuts to keep on top of the debt.
£12 billion will be cut from the welfare budget over three years instead of two, while there will be a £5 billion saving after combating tax avoidance. Further cuts will be made in various government departments (to be announced in the autumn).
Below were the main announcements:
• The national living wage increase to £9 per hour by 2020. From April next year, the NLW will be £7.20 per hour.
• Student grants to be replaced with loans
• Inheritance tax threshold increased to £1million for married couples by 2017
• Fuel duty to remain frozen until the end of 2015
• Benefit cap will be reduced to £20,000 per year, £23,000 for households in London.
• Tax credits and local housing allowance to stay frozen for four years
• “Non-dom” tax status to be abolished from 2017. Anyone who has lived in the UK for the last 15 years out of 20 will have to pay full tax on “worldwide income and gains”.
• Reduction in mortgage tax relief for BTL landlords (to give more space to first time buyers in the market).
• BBC to fund TV licenses for those over 75.
There were only a few announcements aimed at businesses and SMEs including consultations with councils on longer Sunday trading hours and a reduction of corporation tax to 18% by 2020.
R&D Tax credit allowance will also increase £200,000 a year for businesses.
Hopefully we’ll see more on business rate reform over the next coming months and in the Autumn Budget.