Chancellor of the Exchequer George Osborne’s post-election ‘Summer Budget’ contained some radical and surprising measures – aimed, for example, at ‘non-doms’ and buy-to-let landlords – while offering a number of sweeteners, such as inheritance tax exemptions.
The welfare budget also proved a key priority, with Osborne reminding people that – as the example of Greece has demonstrated – “if a country is not in control of its borrowing, the borrowing takes control of the country”. The Chancellor’s flagship measure was the gradual introduction of a ‘National Living Wage’ of £9 per hour.
The Chancellor confirmed his plans to taper pension tax relief for higher earners. From April of next year, for every £2 of adjusted income over £150,000, an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000. More unexpected was the announcement of a savings ‘green paper’, to consult on whether pensions should look more like ISAs.
Changes to inheritance tax had been widely flagged and the Chancellor announced that a new £175,000 allowance for a family’s main home, when it was left to children or grandchildren, would be introduced. With the existing £325,000 allowance, it will allow parents to pass up to £1m to their children free of inheritance tax.
Non-doms may have breathed a sigh of relief at the election result but, in a surprise measure, the Chancellor abolished permanent non-domiciled status. Anyone who has been resident in the UK for 15 of the past 20 years will now be subject to UK tax on their worldwide assets. While there had been fears the Chancellor would completely abolish mortgage interest relief for buy-to-let investors, in the end, he said landlords would only be able to claim back basic rate tax.
Despite being freed from the bounds of coalition, Osborne chose to hold with the Liberal Democrat commitment to take more people out of the tax regime. The Chancellor raised the personal allowance to £11,000 in 2016/17 and also stated his ambition to increase it to £12,500 by 2020. The higher-rate tax threshold will increase from £42,385 in 2015/16 to £43,000 in 2016/17.
Overall, the Chancellor hailed a “safety first” Budget that cut welfare and gave Britain a pay rise. While there will be some significant winners and losers, ultimately, it appears the middle came out on top.
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