Budget 2016 has been delivered by the Chancellor of the Exchequer George Osborne (his 8th Budget). Budget is designed to “act now so we don’t pay later”, says Mr Osborne.
But what does Budget 2016 mean to households and businesses across the country? Here the 4 key points to pick out:
- Increase in thresholds which are important for everybody. Tax Free Personal Allowance will go up to £11 500 from April next year. In effect we will see the rise in the level of threshold in which people move into (higher rates of tax -£45000), which has not been let in for a long time.
- Introduction of lifetime ISA to help young people under the age of 40 start saving towards their retirement. This is really significant and one of the biggest changes we see for a long time, although it may not look like this at first sight. Effectively for people under the age of 40 it will make pension in the old style virtually redundant because they actually get the money back at the front end with tax free withdrawal at the time they draw their pension. There will be therefore no reason to go back to old style pension where you get taxed on your income on your retirement.
- Budget announces tax on sugar drinks which is going to fund sports in school. This is a very significant development as it is really important to get children involved in sports activities as well as cut down on sugar intake which leads to obesity and costs the NHS £6.4 billion per year. It may seem a bit random to choose sugary drinks only as there are other drinks like milky drinks with sugar in them, as well as chocolates, and other sweets and snacks that lead to obesity and there is definitely great more that government can do, however in Budget 2016 Chancellor has made a good start.
- Taxes cuts for small business whereby about 600 000 small businesses will not have to pay any business rates at all!
Not much publicised, but introduced by the Budget is announcement of abolishing of the Money Advice Service set up to help people understand their finances better, and not achieving it’s goal, however important. This will now lead to the increase in the independent organisations of the sort as it is very important to make people confident in handling their finances.
Cuts in disability allowances have also drawn a lot of public attention. It is important that welfare is provided to those who need it. The problem however is that the system it is far too universal; it needs trimming the universal part and refocusing on those who really need it.
A lot of public expenditure cuttings were not in the speech yesterday but George Osborne said last month that global economic turmoil may require further cuts in spending. Reductions needed in order to generate the surplus in 2020 are really quite substantial and no doubts a lot of cuts are in the small print and we will see them in real life.