Concerns over the fairness of wealth distribution amongst different generations, notably the problems faced by many young people in relation to purchasing their first property, dominated much of today’s budget speech. We take a look at the key measures that the government announced.
The Chancellor announced that the Office for Budget Responsibility (OBR) has forecast productivity growth downwards for the next five years, reaching 1.6% in 2022.
Further, debt forecast is to peak this year and government borrowing is predicted to fall each year reaching £25.6 billion in 2022/2023.
Pensions and Savings tax
The ISA annual subscription limit for 2018/2019 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018/2019 will rise in line with CPI to £4,260.
The lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018/2019.
The Conservatives promised that the triple lock would remain until 2020. This guarantees that the basic state pension will rise each year by a minimum of 2.5%, the rate of inflation or the growth in average earnings. In April 2018, the basic state pension will therefore rise by 3%, an increase of £3.65 per week for the full basic State Pension. The full new State Pension will also be increased by the triple lock, rising by £4.80 per week.
Changes will be made to the waiting period for receipt of this benefit, and a £1.5 billion package introduced to address concerns about universal credit.
The current tax free personal allowance will rise to £11,850 in 2018/2019. The point at which an individual pays higher rate tax will also increase to £46,350 in 2017/2018.
National living wage
For those aged 25 and over, the national living wage will increase from £7.50 to £7.83 per hour from April 2018.
Tobacco duty to rise by 2% above inflation
There will be an extra £2.8bn resource funding for the NHS in England with £350 million available for this winter, £1.6bn in 2018/19 and the balance in 2019/20.
In addition, the Chancellor confirmed that the NHS will receive an extra £10 billion in capital funding over the course of this Parliament and that extra funding would be made available for next NHS pay deal.
The VAT threshold for small businesses will remain unchanged at £85,000 for the next two years.
Business rates will be increased in line with CPI from April 2018. Future business rate revaluations will now take place every three years instead of the current five year period.
According to the government, the number of 25 to 34 year olds owning their own home has dropped from 59% to 38% over the last 13 years.
Therefore, the Chancellor announced a commitment over the next five years of a total of £44bn capital funding, loans and guarantees to boost housebuilding in the UK.
The government’s long term aim is to build 300,000 homes each year, on average, by the mid 2020s.
As a significant gap currently exists between the number of planning permissions granted and the number of houses built, the government will commission a report into such discrepancies to deliver an interim response by the next Spring statement.
The rabbit out of the hat
To help young people buy their own home, Philip Hammond announced that, with effect from today, stamp duty will be abolished for first-time buyers on properties up to £300,000 and the first £300,000 of properties up to £500,000.
According to the OBR, the main winners from this proposal will be people who already own property and not, in fact, the first-time buyers themselves.
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