Chancellor of the Exchequer George Osborne delivered his eighth Budget speech on Wednesday 16 March, his third in 12 months.This is our summary of the key announcements, and how they could impact on your finances today and in future years to come.
THE PERSONAL ALLOWANCE WILL INCREASE TO Â£11,500, AND THE HIGHER-RATE THRESHOLD WILL RISE TO Â£45,000 IN APRIL 2017
The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This increased to Â£11,000 in 2016/17, and will now increase further to Â£11,500 in April 2017.
The point at which you pay the higher rate of Income Tax increased from Â£42,385 to Â£43,000 in 2016 and will increase to Â£45,000 in April 2017.
LIFETIME INDIVIDUAL SAVINGS ACCOUNT (LISA): A NEW Â£4,000 LISA THAT YOU CAN USE TO SAVE FOR RETIREMENT OR TO BUY YOUR FIRST HOME
From April 2017, any adult under 40 will be able to open a new Lifetime ISA (LISA). Up to Â£4,000 can be saved each year, and savers will receive a 25% bonus from the Government on this money.
Money put into this account can be saved until someone is over 60 and used as retirement income, or can be withdrawn to help purchase a first home.
The total amount an adult can save each year into all ISAs will also be increased from Â£15,240 to Â£20,000 from April 2017.
NEW HELP TO SAVE SCHEME
A new Help to Save scheme is to be launchedÂ for people on low incomes, providing a 50% government bonus on up to Â£50 of monthly savings.
NEW TAX ALLOWANCES FOR MONEY EARNED BY â€˜MICRO- ENTREPRENEURSâ€™
From April 2017, there will be two new tax- free Â£1,000 allowances â€“ one for selling goods or providing services, and one income from property you own.
People who make up to Â£1,000 from occasional jobs will no longer need to pay tax on that income.
In the same way, the rst Â£1,000 of income from property will be tax-free.
The introduction of these new allowances should help simplify taxation in the sharing economy.
CAPITAL GAINS TAX RATESÂ CUT FROM 6 APRIL 2016, BUT RESIDENTIAL PROPERTY IS STILL TAXED AT EXISTING RATES
Capital Gains Tax (CGT) is a tax on the gain you make when you sell something (an â€˜assetâ€™) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.
From April 2016, the higher rate of CGT has been cut from 28% to 20%, and the basic rate from 18% to 10%.
There is an additional 8% surcharge to be paid on residential property and carried interest (the share of pro ts or gains that is paid to asset managers).
CGT on residential property does not apply to your main home, only to additional properties (for example, a at that you let out).
This enables investors to bene t by realising the pro t on the sale of shares and other assets at the reduced rate of tax.
INSURANCE PREMIUM TAX (IPT) WILL BE INCREASED BY 0.5%
Insurance Premium Tax (IPT) increased by 0.5%, making the tax 10%. IPT is the amount insurers are taxed, which they then pass on to consumers. In July 2015, Mr Osborne announced an increase in the tax from 6% to 9.5%, which took effect in January this year.
Among other things, IPT is charged on medical insurance.
CORPORATION TAX WILL BE CUT AGAIN TO 17% IN 2020
The main rate of Corporation Tax will be cut again to 17% in 2020.