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Budget 24 Budget 2014

Budget 20

Overview
What a difference a year makes. Today, the Chancellor delivered his fifth Budget against the backdrop of positive economic news. The employment rate in Britain reached its highest level for five years, the number of people in work increased by 459,000 on the year to reach 30.19 million for November 2013 to January 2014. The Office of Budget Responsibility revised growth forecasts up. GDP is forecast to grow by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018. All of this signals a strengthening economic recovery but the Chancellor stressed that the long road to complete recovery and deficit reduction is not over. The deficit is now forecast to be 6.6% of GDP this year, 5.5% in 2014-15, 0.8% by 2017-18 with a surplus of 0.2% in 2018-19.
“Doers, makers and savers” were Osborne's targets today. The big surprise today came in the form of reforms to pension taxation and an increase in the personal ISA to £15,000. The Chancellor scrapped compulsory annuities for pensions and introduced a new “pensioner bond”. These are politically astute reforms from the Chancellor which the Opposition will find difficult to attack. As expected, the Chancellor announced tax changes for low and middle income workers, raising the income tax threshold to £10,500. Other populist announcements included halving bingo duty, 1p off the price of a pint and a timely freeze on Scotch Whisky duty. The Chancellor also unveiled that a new £1 coin would be brought into circulation in 2017, marking the end of thirty years of service for the current coin. This is a largely meaningless announcement but one which has generated a significant amount of media coverage. Leading 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 to 2020. The Labour Party responded to the Budget by continuing to claim families are £1600 a year worse off under the Conservatives. The Labour Party remains around 4 points ahead of the Conservatives in the polls. Will this Budget deliver the breakthrough the Conservatives need in the lead up to the 2015 General Election? It’s a good start.

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Budget 2014

Key announcements
Economic forecasts and borrowing
 GDP forecast to grow by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018 Deficit forecast to be 6.6% of GDP this year, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19 Borrowing forecast to be £108bn this year and £95bn next year, leading to a surplus of almost £5bn in 2018-19 The Chancellor repeated his plan to introduce a new charter for budget responsibility, this will be brought before Parliament in Autumn The Chancellor promised to make the £1bn reduction in government department overspends permanent

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Business and general taxes
 Tax on homes owned through a company to be extended from residential properties worth more than £2m to those worth more than £500,000 Lending for exporters is to be doubled to £3bn and interest rates on that lending will be cut by a third Business rate discounts and enhanced capital allowances in enterprise zones are to be extended for three years Annual 100% tax allowance for investment has been doubled to £500,000

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Housing and infrastructure
   As previously announced, the Help to Buy equity loan scheme will be extended to 2020 The Chancellor promised a £270m guarantee for Mersey Gateway bridge Legislation to give Welsh government tax and borrowing powers to fund infrastructure needs will be introduced Following the recent extreme weather, there will be £140m extra funding for flood defence repairs and maintenance £200m will be made available to fix potholes, local authorities will be able to bid for the funding

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Budget 2014

Savers and pensioners
 Cash and shares ISA to be merged into single new ISA with the annual tax-free savings limit increased to £15,000, this will be introduced from July 2014 The Chancellor announced that the 10p tax rate for savers would be abolished All tax restrictions on pensioners' access to their pension pots is to be removed, this will end the requirement to buy an annuity An increase to the total pension savings people can draw down as a lump sum to £30,000 A new “pensioner bond” will be introduced

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Income taxes, NI and personal allowances
  Personal income tax threshold will be raised to £10,500 Threshold for 40p income tax to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year Inheritance tax is to be waived for members of emergency services

Fuel and transport duties
  All long-haul flights to carry lower rate of air passenger duty in line with current charges on flights to the USA The fuel duty rise planned for September has been scrapped

Economic “bads”
    Bingo duty will be halved to 10% Beer duty cut by 1p a pint Duty on ordinary cider frozen Tobacco duty to rise by 2% above inflation

Mind the gap
Budget Statements are famous for “gaps” – the hidden detail and stealth consultation that eventually emerge from the mass of paperwork released on the day. Over the next week, think tanks, MPs, academics, tax and economic experts will pick the Budget apart word by word and graph by graph. PSA will keep you on track over the coming days and weeks. Full Budget 2014 documents can be downloaded here.

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