The Budget Announcement 2016 – Let’s not sugar coat it!
It is highly likely that anyone in the finance or HR industry will not be familiar with the talk of the Budget Announcement that took place today in the House of Commons.
Taxes and savings were central to UK Chancellor, George Osborne’s sixty two minute speech, but without enduring the heckling of parliament members what did the spending speech ultimately come down to?
If in April 2017 you are under 40 years old you will be able to save up to £4,000 each year into the Lifetime Isa, and receive a 25% contribution from the government each year. So for every £4 you save, the government will add an extra £1. This top-up will last until savers are 50.
So it is essentially offering employees an alternative to a pension scheme. Where the government contributes rather than the employer.
The personal allowance which is the amount of income people can earn before they start paying income tax is rising.
We already knew that it was going to go up to £11,000 for basic rate taxpayers in April. But the chancellor announced it will rise again to £11,500 in April 2017.
It has been predicted that the 2017 change will reduce tax by £180 per year, or £3.46 per week, for basic rate taxpayers compared with the current £10,600 personal allowance.
In correspondence with this the higher rate threshold will increase to £43,000 in April, and now Mr Osborne has said it will go up to £45,000 in April next year.
Osborne announced that the duty on beer and cider will be frozen again in “cash terms”. There had been hopes for another cut in duty on beer after 1p reductions in the last three Budgets. However that did not prevail.
But the most surprising topic that came from today’s announcement was the £530m raised by tax on the sugar content of soft drinks which will be spent on primary school sports.
The Office for Budget Responsibility says it could result in a “pretty substantial price rise” on products.
There will be two bands – one for total sugar content above 5 grams per 100 millilitres; a second, higher band for the most sugary drinks with more than 8 grams per 100 millilitres, with the levels yet to be set.
So some of our favourite guilty refreshments such as Coca-Cola and Pepsi, Lucozade Energy and Irn-Bru, will all be affected by the higher tax rate band.
The chancellor stated ‘I am not prepared to look back at my time here in this Parliament, doing this job and say to my children’s generation ‘I’m sorry. We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing’.’ This is all part of the campaign to reduce obesity in the UK. It is proven that obesity drives disease. It increases the risk of cancer, diabetes and heart disease – and it costs our economy £27 billion a year; that’s more than half the entire NHS pay bill. So the sugary drinks are laying the foundations for a much healthier cost efficient Great Britain.
So as a summary here are the top points to come from the first budget announcement of 2016;
• Osborne announces sugar tax on soft drinks companies
• Says £520m raised will go towards school sports
• Also confirms £3.5bn additional public spending cuts by 2020
• But Chancellor forced to admit debt will be higher this year than expected..
• Fuel duty frozen for 6th year in a row
• Tax free pay rises to £11,500
• New lifetime ISA for under 40 year olds