News

March 18, 2015

Budget 2015: The end of the annual tax return

George Osborne had promised a “no give-aways, no gimmicks” Budget. Even so, he has unveiled a number of new measures including the abolition of the annual paper tax return as well as confirming a “major review” of the business rates system.

Thanks to stronger growth, falling unemployment and low inflation, Osborne said that he would be able to end austerity measures during the next parliament. “The hard work and the sacrifice of the British people has paid off,” he said. “Britain is walking tall again.”

The Office for Budget Responsibility has revised its growth forecasts upwards from 2.4% to 2.5% in 2015 and from 2.2% to 2.3% for 2016, he said. And he confirmed that Britain has grown faster in the last year than any other major advanced economy in the world.

For taxpayers, Osborne has increased the personal income tax allowance to £10,800 in April – up from the previously proposed rise to £10,600 – and it will go up again to £11,000 in 2016-17. Also by 2017, the threshold for those paying 40% tax will rise to £43,300.

Osborne also unveiled plans to abolish annual tax returns, replacing them with online tax accounts that taxpayers would be able to access and manage throughout the year. He said: “We believe people should be working for themselves not the taxman. Tax really doesn’t have to be taxing and this spells the death of the annual tax return.”

Many of the new measures aimed at businesses had already been announced – including the promised review of business rates and increases in the national minimum wage. One surprise was the announcement that corporation tax will be cut by 1% to 20% from April 2015.

Osborne also promised investment and support for businesses in the regions, with the extension of enterprise zones, including new zones for Plymouth and Blackpool. He also pledged to create what he called a “northern powerhouse”, with the announcement that Manchester would be allowed to keep 100% of any increase in business rates to reward economic redevelopment.

Savers and first-time buyers were targeted with new measures, including a new Help-to-Buy ISA. In addition, the annual savings limit for ISAs is to be increased to £15,240.

Osborne also announced that tax would be removed on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. This, he said, will mean that 95% of savers will now pay no income tax on their savings at all.

He also confirmed that pension rules are to be relaxed from April 2016 so that existing pensioners will be able swap their annuities for cash.

Headline announcements for businesses include:

• Corporation tax to fall to 20% from April 2015;
• Annual paper tax returns to be replaced with online accounts;
• Fundamental review of business rates;
• Increases in the minimum wage, including a 57 pence per hour rise for apprentices;
• The abolition of Class 2 National Insurance contributions for the self-employed;
• A commitment to raise the Annual Investment Allowance;
• Fuel duty to be frozen and September’s planned increase scrapped.

Image: Thanks to Altogether the Fool on Flickr.

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