A Summary of the Summer Budget - Evolution Financial Planning

George Osbourne laid out the latest budget and there are a few changes to tax, wages, and welfare.

We have broken down the budget to the main points that mat affect you and your family.

The personal tax allowance for 2016/2017will be £11,000.  This means that if you pay the basic rate of tax you will be £80 a year better off.

The point at which people start paying income tax at the 40p rate will rise to £43,000 in 2016. This could save middle class families up to £1,300 a year.

New national living wage will be introduced for all workers aged over 25, starting at £7.20 an hour from April 2016 and set to reach £9 by 2020.

By to Let landlords face cuts in the amount of tax relief they can claim on mortgage interest payments. The amount that landlords will be able to claim will be set at the basic rate of tax, which is currently 20%.

Tax credits and Universal Credit to be restricted to two children, affecting those born after 5th April 2017. This will not affect families of three and over now, only those who have a third/forth…. Child after the 5th April 2017.

Income threshold for tax credits to be reduced from £6,420 to £3,850. Anyone earning more than £3,850 a year will have their Working Tax Credit reduced more steeply.

Working-age benefits to be frozen for four years – including tax credits and local housing allowance, but maternity pay and disability benefits exempted.

Rents in social housing sector will be reduced by 1% a year for the next four years. So if you rent through a housing association or the local council your rent will reduce.

The annual household benefit cap will be reduced to £23,000 in London and to £20,000 in the rest of Britain.

New VED (vehicle excise duty) bands for brand new cars to be introduced from 2017. A standard rate for car owners will be introduced £140 a year for cars purchased before this.

Inheritance tax threshold to increase to £1m, allowing people to pass on estates worth up to £1m free of tax from 2017. It will be easier for most family to write their will as they won’t necessarily have to create a trust to protect their assets.

The amount people can contribute to their pension tax-free is to be reduced for individuals with incomes over £150,000. You will only be able to contribute £10,000 a year instead of £40,000 that you can now.

Permanent Non-Dom status is to be abolished.  From April 2017 anyone that has lived outside the UK for 15 out the last 20 years will pay the same rate of tax as a UK resident.

National Insurance employment allowance for small firms to be increased by 50% to £3,000 from 2016.

Dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income.  The dividend tax rate will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Public sector pay rises will be limited to 1% a year for another four years from 2016/17.

To see how you might be affected by the changes you can use the BBC Budget Calculator here.

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