We haven’t had a full Conservative budget since 1997, but since the Conservatives won a majority vote at the General Election in May, times are changing. The Chancellor George Osborne announced an emergency Summer Budget a couple of months ago, and so this budget will happen today (8th July) at around 12:30pm in the House of Commons – but what can we expect to see in this Budget?
The central two economic tasks for the Conservatives to tackle are eliminating the budget deficit, and reviving productivity. The Government has a rather ambitious target for debt reducing and for cutting public expenditure, and the Summer Budget will map how exactly Osborne proposes to meet these targets.
The Budget is likely to have a strong pro-growth, pro-business theme, and thus it is expected that support for vocational training and for improving the growth path of areas outside the South East of England (especially through the Northern Powerhouse programme) will be featured prominently.
The UK currently has an affordable housing crisis, however the Conservative Party has already promised to set-up a £1bn brownfield regeneration fund. There could be the announcement of tax incentives for developing brownfield sites e.g. extending capital allowances, stamp duty holidays.
There is the expectation that the annual pension tax relief amount that is accessible to the highest paid will be reduced from £40,000 a year to £10,000.
It is also expected that there will be some changes in Class 2 and Class 4 NICs – it is anticipated that after a consultation period, Class 2 NICs will be got rid of, and Class 4 NICs will be based on a new contributory benefit test.
It is anticipated that we will see further detail on the ‘Help to Buy’ ISA, which is projected to be introduced from Autumn 2015 and will enable first time house buyers to build up £12,000 of savings over a three year period, and receive a £3000 Government bonus.
Other expectations include a freeze on rail fares and TV licence fees.
In the Budget in March Osborne talked about cracking down on tax avoidance – it is expected this will enacted against ‘serial avoiders’ by tough measures such as a special reporting requirement, imposing surcharges, and also perhaps even naming offenders. There is also a chance that specific tax-geared penalties may be introduced for situations where the General Anti-Abuse Rule applies.
Osborne also talked about abolishing the tax return by introducing digital tax accounts in phases. There is the expectation that this will be initiated in 2016 for those individuals within PAYE, and then be extended to small businesses.
Osborne has promised not to increase income tax, VAT or national insurance. He did make several election promises, including increasing the income tax personal allowance to £12,500, and increasing the 40 per cent tax threshold from £42,385 to £50,000.
We’ll see if any of these promises and expectations prove true at 12:30! We will be live tweeting about our Summer Budget reaction on our Twitter account; www.twitter.com/icscontractor.
We will also post a blog soon about how the Summer Budget affects contractors so stay tuned!