George Osborne has given his final Autumn Statement before the General Election in May next year.
No one expected huge pre-election giveaways, but the statement still contained a number of surprises; particularly pleasant ones if you are a saver, have a pension or plan to move house.
He started though in bullish mood, saying that the UK was the “fastest growing economy of any developed nation in the world.” Whilst confirming that the “deficit is now half what we inherited, our long term economic plan is working.”
There was then a plea to voters to allow him to “finish the job and stay on course to prosperity.” Although in a nod to his critics he acknowledged that the “deficit remains too high.”
He then turned to the detail of his speech, starting as usual with an overview of the economy.
The Chancellor confirmed that:
- The UK economy is predicted to grow by 3% in 2014
- Growth in 2015 is expected to be 2.4%, falling to 2.3% in 2018
- Over the past 12 months half a million new jobs have been created, whilst the number of people claiming unemployment benefit has fallen by 23%
- 85% of the jobs being created are full time, with the fastest growth in Scotland and the North of England
- Inflation is expected to be 1.5% in 2014 falling to 1.2% in 2015
- The Office of Budgetary Responsibility (OBR) also predicts that wages will rise faster than inflation for the next five years.
Turning to the deficit, the amount the Government spends compares to what it brings in, it will fall to £91.3 billion this year and the drop over the next few years until a small surplus of £4 billion is made in 2018/19.
These figures are better than previously predicted and are a result of lower spending, rather than higher tax receipts.
The Chancellor announced an extra £2 billion every year for the NHS, plus and £1.2 billion is being put into GP services.
He also confirmed previously announced road and rail improvements
The £2,000 employment allowance, which reduces National Insurance paid by employers, will be extended to those people who employ a carer.
Tax – Personal
It’s clear the Chancellor intends to get tough on those people and businesses which don’t pay their tax, saying: “low taxes but taxes that will get paid.”
Mr Osborne announced that the personal allowance, the amount an individual can earn before they start to pay tax, will be increased to £10,600 from 6th April 2015.
At the same time the higher rate tax threshold will increase to £42,385 from April 2015; taking 138,000 out of the 40% tax band.
He also revealed that National Insurance on young apprentices will be abolished.
Tax – business
A new 25% tax on multi nationals which create profits in the UK, which are then artificially shifted overseas, will be introduced. This is predicted to raise over £1 billion during the next five years.
A further £4 billion will be raised by stopping banks offsetting significant losses from the financial crisis against current profits.
Business rates capped will at 2% and the relief given to small businesses will increase from £1,000 to £1,500.
Meanwhile a full review of business rates was announced.
In a surprise move the Chancellor announced that married people, as well as those in civil partnerships, will be able to pass on their ISAs to their spouse and keep its tax-free status.
At present the tax-free status of an ISA is lost on the death of the owner, but in his speech Mr Osborne said: “From today when someone dies, their husband or wife will be able to inherit their ISA and keep its tax-free status.”
It was also announced that the annual ISA allowance will increase to £15,240 for the 2015/16 tax year.
Referring to Pensioner Bonds, which were announced in the last Budget and will be available from January 2015, Mr Osborne confirmed the interest rates will be published next week.
He also said he would act to encourage Peer to Peer lending; although no further details were given.
The Chancellor confirmed the changes to the tax paid on lump sum payments following the death of the member.
To ensure fairness, it was announced that from 6th April 2015, the income from a spouse’s pension resulting from a joint life Annuity purchase, will now be tax-free, providing death occurs before the age of 75. Unfortunately this change will not be retrospective, meaning that widows and widowers already receiving a spouse’s pension will not benefit.
The Annuity rules will also be changed to allow income payments to be made to any individual; currently income can only be paid to a spouse, civil partner or financial dependent.
The Chancellor announced an overhaul of the Stamp Duty system for those people buying a residential property.
The current rates of Stamp Duty are as follows:
- Up to £125,000 Zero
- Over £125,000 to £250,000 1%
- Over £250,000 to £500,000 3%
- Over £500,000 to £1 million 4%
- Over £1 million to £2 million 5%
- Over £2 million 7%
The amount of tax is calculated as a percentage of the whole purchase price, for example, if you were to buy a house for £300,000 to tax bill would be 3% of that amount, i.e. £9,000.
Mr Osborne believes this is unfair and has announced a major change with Stamp Duty now applied on different tiers, rather than the total value of the property you buy:
- No tax on the first £125,000 of the purchase price
- 2% on the amount up to £250,000
- 5% on the next £925,000
- 10% on the next £1,500,000
- 12% thereafter
Therefore someone buying a house for £300,000 will now pay £5,000; a reduction of £4,000.
The Chancellor announced that “98% of home buyers” would pay less Stamp Duty under the new rules.
Initial calculations show that anyone buying a home for under £937,500 will pay less stamp duty under the new rules than would have previously been the case.
Duty on fuel will continue be frozen.
In a move which will be welcomed by families the Chancellor announced that air passenger duty for children under 12 will be abolished from next year; in the following year it will be cut for children aged under 16.
We’d love to hear what you think
How do you rate George Osborne’s last Autumn Statement?
Are the changes to ISAs, Annuities and Stamp Duty a good thing?
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