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Talking Point - March 2016 Budget

Highlights from today's budget announcement

Putting the next generation first and delivering security for working people - these were the key themes at the centre of Chancellor George Osborne's March Budget today.

Key announcements included:

Savings and pensions

Lifetime ISA: from April 2017 individuals between the ages of 18 and 40 will be able to invest up to £4,000 each year into a new Lifetime ISA. For any savings made before age 50, the government will add a 25% bonus. This is £1 for every £4 saved.

The money saved can be used:

  • as a deposit to purchase a first home, valued at £450,000 or less, or
  • to save for retirement. Money taken out before age 60 will incur a 5% charge and will lose the government bonus.
The ISA allowance will be increased from its 2016/17 limit of £15,240 to £20,000 from April 2017.

Public sector pensions: to ensure public sector pensions remain sustainable, employers' contributions will increase from the 2019/20 tax year.

Personal tax

The Personal Allowance will increase from 6 April 2017, allowing individuals to earn up to £11,500 before paying income tax.

The higher rate tax band will also rise to £45,000 from 6 April 2017.

Class 2 National Insurance contributions paid by the self-employed are to be scrapped from April 2018.

Capital Gains Tax will be cut from 28% to 20% for higher rate tax payers and from 18% to 10% for basic rate taxpayers. This will take effect in 3 weeks time on 6 April 2016. Gains on residential property will be subject to an additional 8% surcharge.

Education and health

Academy schools in England: Local authorities' role in running primary and secondary schools in England is to be phased out, with all to be academies by 2022.

The school day: 25% of secondary schools will be able to opt to stay open until after 3.30pm from September 2017, so they can offer a wider range of activities for their pupils. The government has allocated £285 million to fund this.

A sugar levy will be introduced in 2 years time in order to help tackle childhood obesity. The £520 million this aims to raise will be used to increase sports participation in schools.

The new national funding formula will be introduced earlier (from April 2017) to accelerate fairer funding for schools. An additional £500 million has been allocated to ensure this happens.

For businesses

Corporation tax will be cut further from the current rate of 20% to 17% by 2020.

Commercial stamp duty: new rates and tax bands will apply from 17 March on commercial property. Currently the tax rate is applied to the whole value of the transaction.

The stamp duty rate will apply to the portion of the property value within each band:
  • 0% up to £150,000
  • 2% between £150,001 - £250,000
  • 5% above £250,000

There will also be a new 2% stamp duty rate on leases with a net present value of over £5 million.

Business rates: From April 2017, businesses occupying properties with a rateable value of less than £12,000 will be free of business rates. Properties with a rateable value of between £12,000 and £15,000 will have a tapered rate of relief applied.

For individuals

Duty on beer, spirits and most ciders will be frozen this year.

There is a freeze on fuel duty.

Tobacco duty will rise by 2% above inflation from 6pm tonight. Hand rolling tobacco will rise by 5% above inflation.

Commenting on today's Budget statement, Vicki Wentworth, Chief Customer and Strategy Officer at Wesleyan, said:

"Anything that encourages people to save for their future should be welcomed. An increase in the ISA allowance was expected, although increasing it to £20,000 from April 2017, was probably more of an uplift than anticipated.

"However, the big surprise announcement was the introduction of a new Lifetime ISA from April 2017, which is a clear plan by the government to encourage people to save for their future sooner.

"The tax benefits and government bonus are certainly attractive and headline grabbing, but there are restrictions to the new plans. It therefore, makes sense to seek out expert, professional advice when planning to invest to make sure the plans you put in place are robust and appropriate for your own personal needs and aspirations."

Managing your finances

If you would like to discuss any aspect of your finances with a Financial Consultant, call us today on 0800 980 6357 or request an appointment online.

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