WHAT THE BUDGET MEANS FOR YOU

Last week, the chancellor announced his latest budget with cuts to welfare spending, tax credits and the abolishment of student maintenance grants. But what does it all mean for businesses and the tax payer?

The Economy grew by 3% in 2014 and the Chancellor, George Osbourne expects growth of 2.4%, 2.3%, 2.4% and 2.4% over the next four years respectively. Employment levels are expected to rise with one million extra jobs predicted to be created by 2020.

Wages & Employment

• The new national living wage will replace the minimum wage in April 2016 at £7.20 per hour and is set to rise to £9 by 2020.
• National Insurance employment allowance for small firms will be increased by 50% to £3,000 from 2016.
• Public sector pay will rise by 1% per year for the next four years. This will ensure affordable public services and job security.
• The conservative government have introduced an apprenticeship levy for large employers so that those who offer apprenticeships can earn more from what they put in. This incentive is predicted to produce a more skilled workforce for the next generation and an estimated 3 million more apprenticeships.

Tax

• Tax credits and universal credit will be restricted to two children, coming into effect for those born after April 2017. The income threshold for tax credits will also be reduced from £6,420 to £3,850.
• The chancellor also announced that the taxation of dividends will be simplified. The dividend tax credit will be replaced with a new tax free allowance of £5,000 of dividends income for all taxpayers. Dividends paid within pensions and ISA’s will be unaffected by these changes remaining tax free. 85% of those who receive dividends will not see any changes or be better off. Those who either pay themselves in dividends or have large shareholdings worth over £140,000 will see an increase in the tax they pay.
• The UK already has the lowest corporation tax percentage in the G20, however the chancellor has planned further reductions, in order to increase confidence for businesses to grow, invest and employ. The rate will gradually decrease to 19% in 2017 and a further reduction to 18% in 2020.
• Large limited companies will have to pay their corporation tax payments earlier than the current deadline, causing the tax to be paid close to the point at which profits are earned. This will affect those who generate profits of £20 million and above per year.

Annual Investment Allowance

• George Osbourne stated that ‘if Britain wants to produce more it needs to invest more’. Many small and medium sized businesses have benefited from annual investment allowance and with that in mind, the conservative government has increased annual investment allowance to £200,000 for this year and every year.