Chancellor George Osborne has made tax-free savings in ISAs more generous and unveiled new pensioner bonds and tax changes for low and middle-income workers also featured in his Budget, with the amount people earn before tax will go up by £500 to £10,500 and the 40p tax threshold going up.
The chancellor froze petrol duty, cut bingo duty from 20% to 10%, froze duty on Scotch Whisky and cider and cut a further 1p from a pint of beer – but put the price of cigarettes up.
Cash and stocks ISAs are to be merged into a single New ISA with an annual tax-free savings limit of £15,000 from 1 July. The limit for Junior ISA will be raised to £4,000.
He also outlined a new Pensioner Bond paying market leading rates to be available from January to all over 65s, with interest rates of 2.8% for one-year bonds and 4% for three-year bonds.
Other measures announced in Mr Osborne’s fifth Budget speech include:
- A scheme to boost exports – doubling the amount of finance available to £3bn
- An extra £140m for repairs and maintenance to flood defences and £200m for potholes
- Scrapping VAT on air ambulance services and inshore rescue boats
- Scrapping inheritance tax for members of the emergency services who “give their lives protecting us”
- A five-year cap on structural welfare spending from 2015, starting at £119bn and rising in line with inflation. It excludes pensions and Job Seekers Allowance
- A new “garden city” at Ebbsfleet in addition to plans for more new homes
- Stamp duty on homes worth more £500,000 to rise to 15% for those bought by companies, as part of tax avoidance measures
Mr Osborne also unveiled plans to support economic recovery, including tax breaks to boost productivity, exports and manufacturing.
He said Britain was growing at a faster rate than any other advanced economy – revising growth forecasts up to 2.7% in 2014 – but he warned the job of recovery was “far from done.”
He told MPs, “We are putting Britain right but the job is far from done. This country still borrows too much; we still don’t invest enough, export enough or save enough. This is a Budget for building a resilient economy. If you’re a maker, a doer or a saver this Budget is for you. It is all part of a long-term economic plan, plan that is delivering security for the people of this country.”
He said the Office for Budget Responsibility was forecasting that the economy would overtake its pre-crisis peak later this year. The deficit would be lower than expected this year at 6.6% – and he said the government was on track to post a surplus of 0.2% in 2018/19, according to the OBR forecasts.
On the plans for a cap on welfare spending, he told a packed House of Commons, “Britain should always be proud of having a welfare system that helps those most in need. But never again should we allow its costs to spiral out of control and its incentives to become so distorted that it pays not to work.”
Mr Osborne insisted before the Budget that deficit reduction remained his number one priority, with the ultimate goal of delivering an annual budget surplus before 2020. Critics say he has missed targets and has borrowed billions more than originally planned in 2010.
In the run-up to the Budget, the government announced plans to offer up to £2,000 in subsidised childcare to working families after the next general election, a proposed rise in the hourly minimum wage to £6.50 and an extension of the Help to Buy Scheme for aspiring homebuyers.