Budget 2016: Key Points

The Chancellor of Exchequer George Osborne has delivered the Budget 2016 to parliament. In his presentation, the Chancellor told Parliament he was reporting on economy set to grow faster than any other major advanced economy in the world.

A Key highlight was that the government deficit had been reduced by two thirds and continues to fall each year and on course for a budget surplus. The labour market was also reported to be delivering the highest employment since 1974.

The Chancellor said this was a budget set in response to turbulent financial markets and weak outlook for the global economy.

KEY POINTS

Public Finance

The government deficit has been cut by almost two thirds and will be eliminated by 2020 with the government running a surplus – where more money is raised than is spent.

To help achieve this, there will be a further £3.5 billion of savings from department spending in 2019-20.  

Health

In order to tackle the health impacts of smoking, the government is continuing the tobacco duty escalator - ensuring tobacco duties rise by more than inflation each year in this Parliament. Hand-rolling tobacco is currently taxed at a lower rate than cigarettes. The government will therefore increase the duty on hand-rolling tobacco by an additional 3% above the escalator from 6pm on Budget day.

Education

All schools in England are set to become academies or free schools or be in the process of becoming one. This will give head-teachers greater control over their budgets and curriculums taught.
The current system for funding schools will be replaced by a fairer national funding formula from April 2017.

There will be an additional £20 million for schools in the north of England.
Soft drinks companies will pay a levy on drinks with added sugar from April 2018. This will apply to drinks with total sugar content above 5 grams per 100 millilitres, with a higher rate for more than 8 grams for 100 millilitres.

Funds raised will be used to double the primary PE and sport premium (additional money schools have to spend on PE and sports) to £320 million.

25% of secondary schools will be able to opt in to a longer school day from September 2017 so that they can offer a wider range of activities for pupils. This will be funded by up to £285 million a year.

Personal Finance

From April 2017 any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each and savers will receive a 25% bonus from the government on this money. Money can be used to save for retirement or purchase a first home.

The total amount you can save each year into al ISAs will also be increased from £15,240 to £20,000 from April 2017.

To help people who find it hardest to save, the government will introduce a new Help to Save scheme for those on low incomes who wish to regularly set aside some of their income. The scheme will be open to 3.5 million adults in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours at the National Living Wage, or those in receipt of Working Tax Credit.

Income Tax and National Insurance

The personal allowance for income tax is set to rise further from £10,600 this year to £11,000 in 2016 and £11,500 in 2017.

The point at which you pay the higher rate of income tax is also set to increase from £42,385 to £43,000 in 2016 and to £45,000 in 2017.

Class 2 National Insurance (NI) contributions for self employed people will be abolished. They will only have to pay Class 4 NI contributions from April 2018. Currently, self employed people have to pay Class 2 NI contributions of £2.80 per week if they make a profit of £5, 965 or more per year. They also pay Class 4 NI contributions if their profits are over £8,060.

Fuel duty

Fuel duty will be frozen again in 2016-17.

The Chancellor also announced that he would abolish the petroleum revenue tax and reducing the supplementary charge on oil and gas extraction in response to falling oil prices and to protect jobs in the sector.

Welfare

The government announced in the Summer Budget 2015 and Autumn Statement 2015 reforms to ensure that the welfare system is both fair and sustainable. The Department for Work and Pensions (DWP) will continue to deliver Personal Independence Payments (PIP) with the intention of supporting claimants with the greatest need in helping them meet the extra costs of their disability or long-term health condition. Spending in 2015-16 on PIP and its predecessor, the Disability Living Allowance, is expected to be over £3 billion higher in real terms than in 2009-10. Spending on these benefits is forecast to be higher in real terms in 2019-20 than in 2009-10.

The government is pledging £100 million to help people move on from hostels and refuges. This will pay for 2,000 places to live for people who need to move on from emergency hostels. An additional £10 million will also be available for schemes like ‘No Second Night Out’ which is aimed at helping people who have recently started sleeping rough to come off the streets after a single night.

From April 2017, 4000 Armed Forces veterans will be able to keep payments from their pensions of they need social care.