Budget 2016 digested: 10 things you really need to know
You will be able to earn more before you owe any tax
From April 2017, the Personal Allowance – the amount of income you can earn before you start paying income tax – will rise to £11,500. The limit is currently £10,600 and is rising to £11,000 from April 2016.
The point at which you pay the higher rate of income tax will also increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.
Young people will be able to save for a house or retirement with a new type of ISA
From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money.
Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.
The ISA allowance will also be increased from £15,240 to £20,000 from April 2017.
See YourMoney.com’s Lifetime ISA guide for the full information.
AirBnB hosts and other ‘micro-entrepreneurs’ will get tax breaks
From April 2017, anyone who makes small amounts of income from selling services online or renting out their homes through the internet will be eligible for two new tax-free £1,000 allowances.
People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.
In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.
A new sugary drinks tax will pay for more school sports
A ‘soft drinks industry levy’ will be introduced from April 2018 and will be paid by producers and importers of soft drinks that contain added sugar.
The levy will be charged on the total sugar content and two bands will be introduced: a main rate charge for a drink which has above 5g of sugar per 100ml and a higher rate for those with more than 8g per 100ml.
Revenue from the sugar tax will be used to pay for improvements in children’s health and wellbeing such as funding for primary schools to improve PE and sports offerings.
Capital Gains Tax rates will be cut from 6 April 2016
Capital Gains Tax (CGT) is the tax you pay when you sell an asset that has gone up in value. It is paid at a basic or higher rate depending on the rate of income tax you pay. Capital Gains Tax on residential property does not apply to your main home, only to additional properties
From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.
Digital pension dashboards will be a reality by 2019
The government has given the pensions industry a deadline of 2019 to introduce a pensions dashboard.
Earlier this month, campaign site Which? called for the government to introduce a dashboard to allow savers to view all their pensions in one place. The government said it “will ensure the industry designs, funds and launches a pensions dashboard by 2019”.
It comes as statistics from the Department for Work and Pensions (DWP) show that the average person will move employers 11 times over their working life, meaning they could end up with 11 or more private pensions by the time they retire.
Drivers weren’t hit as hard as expected
Fuel duty will be frozen again in 2016-17, for the sixth year in a row, saving the typical motorist £75 a year.
Insurance premium tax was increased but only by 0.5%, far less than the 3% expected. This is a tax levied on insurance companies. When IPT was hiked from 6% to 9.5% last year, the tax rise was passed onto consumers through higher premiums. But experts believe such a small increase this time round will not make much of an impact on premium costs.
Small business owners were among the winners
There were a number of positive announcements for owners of small businesses including a cut to the rate of corporation tax from 20% to 17% in 2020, which will benefit over a million large and small companies.
Also reforms to Stamp Duty Land Tax on non-residential property transactions were unveiled, cutting the tax for many small businesses purchasing property, and cuts to business rates, which will mean 600,000 businesses will pay no rates at all.
Beer duty was frozen
Duty on beer, cider and whisky was frozen this year but tobacco duty on cigarettes will increase by 2% above inflation from 6pm today.
Every school will be an academy by 2022
By the end of 2020, every school in England will be an academy or free school – or be in the process of becoming one. This will give head teachers more control over their budget and the curriculum they teach.
The current system for funding schools will also be replaced by a fairer national funding formula from April 2017. There will be £20m a year in additional money for schools in the north of England.