News

Budget 2016 announcement

Chancellor of the Exchequer, George Osborne, has today announced the 2016 Budget.

Some of the key highlights were that corporation tax will be cut to 17% to help small businesses, with the headline rate being cut to 20%, down from 28%. This is because corporation tax is “one of the most distorted and unproductive taxes”, Osborne said [1].

Tax-free personal allowances will be increased to £11,500 by next April; those earning less than £45,000 will not have to pay the 40p rate of tax [1].

There will be an extra £500m in funding for education, with intentions to keep schools open longer and facilitate improvements within the schooling system – more details are due to be announced tomorrow [2].

There are plans for further initiatives in energy and the environment, including a climate change levy rise from 2019, which is a tax on non-domestic users to encourage them to reduce energy consumption; £730m in funds to support renewable technologies; and the supplementary charge on oil and gas will be cut to 10% to help the struggling industry [1].

There are also plans to raise £500m a year from commercial stamp duty, with a zero fee on properties up to £150,000, 2% on the next £100,000 and a top rate of 5% over £250,000 [3].

Fuel duty is set to freeze for the sixth consecutive year, saving the average driver £75 per year [2].

In relation to savings, there will be tax relief on financial advice, and an increased limit for ISAs to £20,000, again from April, encouraging savers to “put the next generation first” [2].

The inflation forecast for 2016 was cut from 1% to 0.7% [4].

Debt to GDP rose from 81.7% to 82.6% for 2016-17, meaning Osborne missed his target to have debt to GDP fall every year. The borrowing forecast was revised from £49.9bn to £55.5bn for 2016-17, and up for every other year until 2019 [4].

There are also planned spending cuts of £3.5bn by 2020. The Guardian’s Political Correspondent, Rowena Mason, stated “Osborne is pressing ahead with austerity as usual, and despite some financial voices saying there is no need to at this point when the economy is still fragile. Some of this will come from cuts to the disability budget” [2].

Osborne has repeatedly said the aim of the Budget was to focus on the long-term, with putting “the next generation first” and helping to structure the UK to be “fit for the future” [4].

The entire Budget can be read here.

[1] Telegraph. ‘Budget 2016: George Osborne introduces new sugar tax on soft drinks’. telegraph.co.uk
[2] The Guardian. ‘Budget 2016 at a glance: the key points’. theguardian.com
[3] CityWire. ‘Budget 2016: Osborne overhauls commercial stamp duty’. citywire.co.uk
[4] Financial Times. ‘Budget 2016 summary and highlights’. next.ft.com