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A fine day to be “middle class”?

I wish I was still a gambling man. I might have put a few quid on how many times the Chancellor George Osborne used the word ‘family’ during his hour-plus-long Budget speech this week (Wednesday).

The jewel in his first Tory made Budget since Ken Clarke’s of 1996 was to finally give life to his long promise of substantially raising the threshold for Inheritance Tax – a key mid-market policy. Image of paper being ripped back to show writing stating 2015 budget

He raised income tax personal allowances, lowered income threshold tax credits, added incentives to saving and there was even a bit of help for the poor-impoverished student. He did however attack mortgage allowances for buy-to-let investors and added further to his view of pension reforms but cut top allowances.

There was bad news for so called non-doms, those who claim not to be resident in the UK for tax reasons even if they are British. He’s shaving the ‘culture of benefits reliance’ by chopping benefit caps lower and there was some pain there too in terms of the deep and wide-sweeping welfare reforms he announced, especially for those with large families who rely on child benefit.

Indeed, Mr Osborne plainly stated that he wanted to investigate – via a Green Paper - how to make it so that pensions could be treated like ISAs.  Presumably this means not letting them be run by pension companies, but I digress. 

For working families with mortgages and savings then, in summary, Mr Osborne announced:

• Raising the personal allowance for Income Tax to £11,000 and for top rate tax to £43,000. This is with a view to eventually making those £12,500 and £50,000 by the end of the Parliament.
• Inheritance Tax threshold raised to £1m phased in from 2017 by allowing each partner to exclude up to £175,000 from the value of the family home from IHT.
• Introduction of a new National Living Wage which he expects to reach £9 for the over 25s by 2020.
• Mortgage interest rate relief for buy-to-let owners to be restricted to the basic rate of Income Tax though he did state that there would be taper reliefs in place to ease the burden for those who rely on rentals for their income.
• The rent-a-room scheme extended to £7,500 a year in which lodgers’ rents can be tax-free up to that point.
• Annual tax relief on pensions to be limited to £10,000 a year  and said the amount people can contribute to their pension tax-free each year will be reduced for those on more than £150,000a year, including pension contributions.
• Intriguingly he also announced  major reform of Vehicle Excise Duty where new bands for new cars will be introduced from 2017. 95 per cent of car owners, he said, would pay £140 a year and these would go directly to road building projects. 
• He inferred though gave no details there would be extensions to the Help-to-Buy Isa launched last year.

He also added that permanent non-dom status will be abolished meaning that anyone with non-dom status who has lived in the UK for more than 15 of the last 20 years will pay the same tax as everyone else.

And student maintenance grants will be replaced with loans from 2016-17 to be paid back once people earn more than £21,000 a year. The maintenance loan for students will be increased to £8,200 a year.

Working-age benefits will be frozen for four years – including tax credits and housing allowances.
So some off the top, some off the bottom and the middle gets to benefit most.

Thanks George.

Steve McDowell

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