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A Budget for the Makers, the Doers, and the Savers...

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… as the Chancellor of the Exchequer put it in commending his budget to the House yesterday. The full text of George Osborne’s speech is here.  The supporting documents are available on the Gov.UK website.

There is an important distinction, of course, between ‘debt’ and ‘deficit’: ‘debt’ represents the total borrowings of the country whereas ‘deficit’ is the shortfall of income against expenditure each year. The ‘deficit’ adds to the debt. A return to surplus would see the debt mountain coming down.  What has been achieved, to date, is a reduction in the ‘deficit’ – ie debt is increasing less quickly.

Reducing deficit is a difficult exercise in cutting costs whilst fostering a return to economic growth. The makers, doers and savers are key elements in this delicate equation and they receive some encouragement from this Budget. The Office for Budget Responsibility has raised is estimates of economic growth to 2.7% this year and 2.4% in 2015. The deficit is forecast to reduce to 5.5% of GDP (half its rate in 2009-10) and to be eliminated by 2018-9). See further HMT infographic.

Key Budget measures include measures for savers and investors include:

Junior ISA allowance to be increased to £4,000  pa
ISAs to be reformed from July 2014 and allowance increased to £15,000 pa
The ‘starting tax rate’ for savers will be reduced from 10% to zero and the allowance increased to £5000
From Jan 2015, new fixed interest bonds for those over 65 will be introduced

Pension reforms will give greater flexibility in how benefits can be taken from ‘money purchase’ pension schemes and eliminate the need to buy an annuity.

Personal income tax allowances rise to £10,000 in April and to £10,500 from April 2015. There are also small increases in the threshold for 40% tax.

For Businesses :

The Annual Investment Allowance will double to £500,000
R&D tax credit for loss-making SMEs will increase to 14.5%
The Seed Enterprise Investment Scheme (SEIS) will be made permanent

See also the HMRC overview of the tax changes