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Budget breakdown – how will you be affected?

Luke Whitmore - Law on the Web

  1. 17 March 2016
  2. Miscellaneous
  3. 0 comments

Chancellor George Osborne yesterday delivered this year’s Budget, setting out the government’s spending priorities for the next year.

So what effects might the Budget have on day-to-day life? With various changes, no doubt you’ll be affected in some way or another.

The personal allowance – the amount an individual can earn before they become eligible to pay income tax on it – is set to increase to £11,500, starting April 2017. The threshold at which people become eligible to pay the higher 40% rate of tax will also rise, to £45,000.

Those under the age of 40 looking to save for a mortgage or pension will be given the opportunity to pay into a ‘lifetime ISA’, which the government will pay £1 into for every £4 saved until the age of 50. The maximum amount that can be saved in a regular ISA annually will also increase next year to £20,000, up from around £15,000.

All schools in England will now be required to become academies, operating independently rather than being run by local councils, and funding is being put in place for a number of them to extend the school day beyond 3.30pm.

One surprise measure in the Budget is the announcement that a ‘sugar tax’ will be levied on soft drinks, which the chancellor said is intended to reduce childhood obesity. The money raised will be used to fund sports in primary schools, with the goal of doubling the amount spent on it. Fruit juices will be exempted from the levy, which is set to be introduced in 2018.

But adults who like to indulge will be laughing all the way to the bar, as the duty on beer, cider, and whisky and other spirits has been frozen. However, the tax on cigarettes will rise by 2%, and rolling tobacco by 3%.

Fuel duty remains frozen at the rate of 57.95 pence per litre, the same amount it has hovered at since March 2011. Edmund King, the president of the AA, said that this would bring “relief at the pumps for millions of motorists”. However, drivers may have to shell out more for insurance after a 0.5% increase in the rate of the Insurance Premium Tax.

Also included in the Budget were a number of benefits for those running small businesses. The threshold for being eligible for small business rate relief will increase from £6,000 to £15,000, with the threshold for higher rate relief rising from £18,000 to £51,000.

Self-employed workers will no longer be required to pay Class 2 NICs (National Insurance contributions), starting in 2018. These contributions are currently required if they earn £5,965 or more.

And so-called “micro-entrepreneurs” who sell small numbers of products online or rent property in the short term will benefit from a new £1,000 tax allowance for each of these activities, meaning those who trade on eBay or provide rental properties on Airbnb may be exempt from paying tax on what they earn.

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