Latest UK Budget Aimed at Bolstering Resilience

Last week the UK Chancellor of the Exchequer, George Osborne,revealed his 5th Budget since the Conservative and Liberal Democrat coalition government came to power. This was a more upbeat statement than previous budgets as the UK economy at last is showing some signs of recovery and an increasing confidence due to the recovery coming more quickly than originally anticipated. Indeed, the Office for Budget Responsibility has altered its economic growth forecast from 2.4 per cent for 2014 up to 2.7 per cent.

Of course, these are only signs of an economic recovery and the UK is not there yet, with further austerity measures still expected to ensure the recovery continues. There are still high levels of borrowing amongst the UK population and the economy is not yet as resilient as the Chancellor and, of course, the population, would like. As part of these continuing stringent measures to secure a bright economic future there will be a 5-year structural welfare cap, starting at £119billion, introduced in 2015.

George Osborne focused on business investment and productivity and exports; there will be another temporary increase in the Annual Investment Allowance to £500,000 and export lending will be increased two fold from £1.5 billion to £3billion. On the home front measures were announced to control the ever increasing costs of energy to manufacturing businesses with an injection of £7billion specifically designed to reduce these costs.

There will also be some substantial changes to personal taxation areas: perhaps most significantly the changes that mean UK pensioners will now be allowed much greater control over their pension savings than they have been in the past. No longer will pensioners be required to use a major portion of their pension pot to produce an annual income – something long hated by pensioners since the annual rates have fallen so significantly in recent times.

For those still in employment there will also be benefits due to the additional rise in the basic income tax personal allowance, which will rise to £10,500 per person per year from 2015.

The average UK saver has for the years of the economic slump since 2008 been suffering from historically low interest rates. The rates that have kept mortgage repayments so low for borrowers have had a tough consequence on the income for savers. To tackle this problem Osborne plans to reduce the starting rate of tax on interest earned down to zero. Even more significant could be the major reform of Individual Savings Accounts (ISAs), which will in future allow cash ISAs and shares elements of the existing ISA to be combined into one product the New ISA (NISA).

The planned fuel duty rise in September 2014 will not now go ahead and duty on whisky, other spirits and ordinary cider will be frozen at their current rates whilst the duty on beer will be dropped by a penny a pint.

Other changes announced in the budget statement included modifications to the Tax-Free Childcare scheme, which could be worth up to £2,000 for some families, an increase in the National Minimum Wage, an extension of the Help to Buy scheme to allow more home buyers with small deposits to purchase a home, and the creation of a new garden city at Ebbsfleet in Kent.Finally, in order to try and stamp out problems with fake £1 coins plans were announced to introduce a new twelve-sided coin. With the many changes introduced it would be wise to talk to a chartered accountant or tax advisor on how best to take advantage of the new regulations, many of which will come into effect within a month.