A progressive, South West based accountancy practice

George’s Marvellous (?) Medicine


George Osborne has just delivered his last Budget speech before the election. As it stands, the election is too close to call, so who knows if he’ll get another opportunity.

This was a highly political budget, but included a huge number of changes. I’ll attempt to summarise those changes, and list some action points.


The budget has been delivered against a background of higher growth, and lower inflation. This has given the Chancellor a large degree of room for manoeuvre. He has used this to announce a wide range of changes, while continuing to reduce the expected deficit.

He now expects to return to a surplus in 2018/19, meaning the national debt will eventually start to fall then. These figures have been based on reasonable growth forecasts of an average of 2.4% per annum over the next Parliament.

Changes affecting individuals

Income tax

The increase in the personal allowance is welcomed, if you earn over £10,000 per year. This will save around £10 per month for a basic rate taxpayer.

The higher rate threshold will increase to £42,385 from next month, then £42,700 and £43,300 over the next two years.

The amount of Marriage Allowance that can be transferred is increased to £1,100, meaning the saving increases from £212 to £220.

National Insurance

The rates already announced in December 2014 have not been adjusted. The change will save someone on the average Plymouth salary about £1 per month.

Tax credits

There are small increases to the amounts, and the income thresholds beyond which they are withdrawn.

Savings and pensions

There’s a big increase in the amount of savings income that you can earn tax free, if your other income is less than £15,600 next year. If you fit the criteria, you may be able to earn up to £15,600 a year free of tax, even without the use of ISAs.

For every basic rate taxpayer, the first £1,000 of savings income will be exempt from tax.

ISAs are to be far more flexible. You will be able to take money out, and put it back in later, without the repayment counting towards your annual limit.

Pensioners are to have even more flexibility, including the ability to “sell” their annuities in return for a lump sum. Care must be taken as the “Red Book” contains a forecast of £0.5 billion of tax on these transactions, implying

The lifetime limit for pension saving will be cut to £1 million. Last time the limit was cut, there was an election that could be made to protect the tax free status of funds already accumulated in excess of the reduced limit, so we must expect a similar situation. A visit to your friendly IFA is definitely a good idea! Please contact us if you need a referral.

Using an ISA to buy a home

First time buyers will be given an incentive to help them raise a deposit. For every £200 saved, the Government will contribute £50, up to a limit of £12,000 of savings. You can read full details of the scheme here. The scheme is due to open in Autumn 2015.

The Death of the Tax Return

Mark Twain once said “The reports of my death have been greatly exaggerated.” It is a similar situation with the tax return. While the annual rush to meet the January deadline should go, you will be able (required?) to complete your online tax account throughout the year. It should make life a lot easier for people who have tax deducted at source, but will still require those in receipt of untaxed income to advise HMRC of the amounts.

It is worth pointing out that there will have to be a deadline, to ensure that information is uploaded on a reasonably timely basis. In the old days, before Self-Assessment, a lot of time and money was wasted in unnecessary legal action by HMRC, trying to get accurate figures from taxpayers.

Changes affecting businesses

Class 2 NIC

The £2.80 weekly levy will be abolished. For many years, it has been used simply as a device to ensure the self-employed register for income tax, so its abolition will not change the dynamics a great deal. It will make it slightly less attractive to run as a limited company. Profits will have to be in excess of £8,060 per annum before the savings start, rather than around £5,500.

Employment Allowance

Employers will continue to receive up to £2,000 per annum of discount on their employer NICs. Unfortunately, it is not transferable if you would otherwise pay less than that.

Employers’ NIC is abolished for under 21 year olds from April 2015, and for young apprentices from April 2016.

Small business rates relief

The doubling of relief continues for another year, meaning any business with a single premises of rateable value of less than £12,000 will still not pay business rates. There are other rules for businesses with multiple premises or whose only location exceeds that limit.

Improvements to tax relief schemes

The Chancellor announced improvements to the Film, High End TV Relief schemes.

Tax avoidance

There was the usual announcement on raising tax from attacking tax avoidance and evasion. The amount targeted this time is £3.1 billion.

Other changes

Money for South West transport schemes

There is £7 billion for investment in transport schemes in the South West. This should make Plymouth an even more attractive place to live and work.

New Enterprise Zone

A new zone based on Plymouth Dockyard was announced. Typically, there are business rate, capital allowances, and planning advantages for businesses located in Enterprise Zones.

A word of warning

The Budget includes a massive reduction in the deficit in 2016/17, which has to be paid for from higher taxes or expenditure cuts. We need to assume this is coming, and use the next 12 months to adjust our own budget so we are prepared for their budget changes.

Action to take

Families should rework their budgets and see if they can put aside some savings ready for the (even) leaner years to come.

Savers should contact an IFA to review the potential savings products and plans available, as they have become much more flexible, and will have greater flexibility still by Autumn 2015.

Small businesses should look at their chosen structure and consider whether a change to a limited company would be beneficial, or whether they should relocate to the new Enterprise Zone (when it’s et up).

All businesses should look at the detail of the enhanced tax relief schemes and see whether they can fit the criteria. It is particularly important for business in the new technology sectors (energy saving, online activities etc.)

Similarly, all businesses should be considering their plans to increase staffing over the next two years, and cost in both the increase in National Minimum Wage, and the cuts in NIC for employing young people.


Although it was trailed as “not a giveaway budget, there was a huge amount of new opportunities announced. While the detail has yet to be unveiled, it is well worth reading a good summary of the proposals, and asking your tax adviser to research those changes which may be of benefit to you, our family or your business.