On 16 March 2016 the Chancellor of the Exchequer, George Osborne, announced his Budget.
“This is a Budget that gets investors investing, savers saving, businesses doing business; so that we build for working people a low tax, enterprise Britain; secure at home, strong in the world.”
The published HM Treasury ‘Budget 2016’ statement sets out the detail and this can be downloaded from the www.gov.uk website.
To help you understand the key points, we have prepared a summary document outlining some of the changes which may impact you and your future plans.
The key points of the Budget 2016 are:
- Tax-free personal allowance, the point at which people start to pay income tax, will rise to £11,000 for the 2016-17 tax year. This will rise again to £11,500 for the 2017-18 tax year.
- The threshold at which people pay higher rate income tax will rise from £42,385 to £43,000 from 6 April 2016, and will rise again to £45,000 for the 2017-18 tax year.
- Capital Gains Tax rates will be reduced from 28% to 20%, and from 18% to 10%. There will be an 8% surcharge for gains on residential property. This is effective from 6 April 2016.
- Help to Save
Announced on 14 March 2016, the Help to Save scheme will be available to eligible people on low incomes who wish to save up to £50 a month. The government will then offer a 50% bonus up to £600 after 2 years with an option to continue saving for a further 2 years for a total bonus worth up to £1,200. The scheme will be introduced no later than April 2018.
- The Lifetime ISA
From April 2017, UK residents aged between 18 and 40 will be able to open a Lifetime ISA. Up to £4,000 each tax year can be saved into the account with a 25% bonus from the government, with a maximum bonus being £1,000 each tax year. Savers can continue to save into the account after age 40 but bonuses will only be paid annually up to the age of 50.
Banks will announce any plans regarding these products in due course.
- ISA allowance:
The annual ISA allowance for the 2017-18 tax year will increase from £15,240 to £20,000.
- Insurance Premium Tax (IPT):
The standard rate of IPT will increase from 9.5% to 10% on 1 October 2016.
Fuel duty remains frozen with the main rate of fuel duty at 57.95 pence per litre for 2016-17.
The duty on beer, some ciders, whisky and spirits are also frozen this year.
Excise duties on tobacco to rise by 2% above inflation.
If you have any questions relating to the Budget 2016 statement, please contact your Bank's Relationship Manager, who will be happy to help.