This was one of the most interesting and least leaked budgets of recent years.
The biggest surprise for most was the Chancellor’s bid for support from the traditional labour heartland of voters – and this after the election! The increase in the tax free personal allowance to £11,000 will cost the Treasury more than £1bn per year. This together with the new National Living Wage of £9 an hour by 2020 will make lower earners considerably better off. Working parents are also being assisted by the pledge to provide 30 hours of free childcare per week.
For those not working, however, and those on benefits, the picture is not so rosy. For example the reduction in the benefits cap from £26,000 to £20,000 per household (or £23,000 in London) is forecast to put a staggering £16bn in the Treasury coffers over the next five years.
The promise to take the family homes worth up to £1million out of Inheritance Tax was kept but the highest earners will lose most of their tax relief on pension contributions after April 2016 as anticipated.
Another surprise for companies was further cuts in their tax rates. These have been reduced and aligned for all companies at 20% over recent years. They will now go down to 19% in 2017 and then again to 18% in 2020 costing the Government a total of £6.5billion.
The Annual Investment Allowance limits, which allow a full deduction against profits for the purchase of plant and machinery in the year of purchase, have been going up and down like a yo-yo over recent years. Businesses will welcome the fact that there will now be a permanent level of £200,000 per year.
Businesses will also benefit from a cut to their National Insurance bills by another £1,000 as the Employment Allowance increases from £2,000 to £3,000 for all employers.
Those middle and higher rate taxpayers who have invested in buy-to-let properties had a nasty surprise when the Chancellor announced that tax relief for mortgage interest payments will gradually be restricted to the basic rate of tax. This will make such an investment much less attractive for those cashing in their pension funds and borrowing for such properties.
Those who have invested in the stock market and shareholders of private companies will also be hit by the changes to the taxation of dividends.
The rise in Insurance Premium tax will affect almost everyone. The increase from 6% to 9.5% may not sound that much but it will cost us in total an extra £1.5bn per year.
So definitely winners and losers but the real surprise was who they were!