No one quite knew what to expect in the first budget by a majority Conservative government for almost 20 years.
In his seventh Budget Statement as chancellor, George Osborne promised a ‘big budget for a country with big ambitions’.
As predicted there were details on how the government will fulfil its pre-election goals of reducing welfare spending by £12 billion and changing the inheritance tax nil-rate band structure.
There were also some surprises such as the compulsory introduction of the national living wage from April 2016 and a reduction in corporation tax.
The Chancellor also gave an update on the wider economic picture using figures from the Office for Budget Responsibility (OBR). Growth for 2014 was 3% (up from the forecast of 2.6% in March) and is expected to be 2.4% in 2015 thanks to stronger private consumption and investment.
This is the second year in a row that the UK is forecast to have the strongest economic growth of any major advanced economy.
The OBR predicts that a million more jobs will be created by the end of the Parliament.
The deficit is forecast to be 3.7% of GDP in 2015 and will fall by around 1% each year until 2019 when there will be a small budget surplus of 0.4%.
Despite the continued growth in the UK, Osborne warned that the ‘global economic risks are rising’, pinpointing slowing growth in the USA and China as examples.
The following report summarises the announcements made by Chancellor George Osborne during the Summer Budget on Wednesday 8 July 2015.
The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. The information in this report is based upon our understanding of the Summer Budget 2015, in respect of which specific implementation details may change when the final legislation and supporting documentation are published.
This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content.
Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.
At a glance
The measures announced in Summer Budget 2015 include:
The corporation tax rate will be cut to 19% in 2017 and 18% in 2020. Payment dates for large companies will be brought forward.
National living wage
A compulsory wage for over 25s of £7.20 an hour will be introduced in 2016, rising to over £9 in 2020.
Dividend tax credit will be replaced by an annual tax-free allowance of £5,000. Tax rates of 7.5% and 32.5% will be set for basic rate and higher rate taxpayers on income from dividends.
Annual investment allowance
The allowance will be£200,000 from 1 January 2016.
The employment allowance will rise from £2,000 to £3,000 from April 2016.
An apprenticeship levy will be introduced for large companies to help fund training.
The personal allowance will rise from £10,600 to £11,000 from April 2016. The higher rate threshold will increase to £43,000 from April 2016.
A £175,000 transferable threshold for residential property passed to children and grandchildren will be phased in from 2017.
Mortgage interest rate relief on buy-to-let property will be restricted to the basic rate of income tax. This will be phased in over 4 years starting in April 2017.
Rent-a-room relief will rise to £7,500 a year from April 2016.
The permanent non-domicile tax status will be abolished from April 2017.
Pension contributions tax relief for additional rate taxpayers will be tapered to a minimum of £10,000 a year from April 2016.
Working parents with…