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Introduction

The first Budget after a general election is traditionally the

time for introducing unpopular measures. The Chancellor is not

constrained by a coalition partner and has nearly five years until

the next election. Mr Osborne’s stated aim is to move the UK

from a low wage, high tax, high welfare economy to a higher

wage, lower tax and lower welfare economy.

Following the pattern of recent years, some of the Chancellor’s

announcements were well trailed beforehand. For example, the

quantum of the benefits cuts (£12bn) and their targets (working

age claimants) were well known. What came as something of a

surprise was that the pain was spread over a three-year period

rather than the expected two. The inheritance tax main residence

allowance was well broadcast – the Chancellor even wrote about

it in

The Times

at the weekend – but the allowance turned out to

be less generous than the leaks suggested.

There was unexpected news for wealthier individuals with the

introduction of higher rates of tax on dividends from next April

alongside a new dividend tax allowance. The consultation on

possible radical reform of pension tax relief could

herald further major changes.

The government will legislate to set

a ceiling for the main rates of

income tax, the rates of VAT

and employer and employee

NIC rates so that they cannot

rise above their 2015/16

levels.

BUDGET

8 JULY 2015

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