The first budget of the new government has announced a few surprising changes — including a compulsory National Living Wage for over 25s to be introduced next year.
The key points include a new National Living Wage of £9 an hour by 2020 (£7.20 from April 2016), a reformation of the welfare system restricting Child Tax Credits to two children per family and big changes to Inheritance Tax.
Chancellor George Osborne introduced the new changes to the budget saying: “This will be a budget for working people.
“A budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.”
Starting next April, workers over 25 will be paid a National Living Wage of £7.20 an hour, which will rise to £9 by 2020.
The tax free Personal Allowance will also rise in April from £10,600 to £11,000 and public sector pay will increase by 1% a year for four years.
The higher earners will also see an increase from £42,385 to £43,000 before paying a 40% tax rate.
A reformation of the welfare system will see several changes including:
- Tax credits and Local Housing Allowance to be frozen for four years from 2016-17
- Household benefit cap to be reduced to £20,000 outside London
- Child Tax credits will be limited to two children for children born from April 2017
- 18-21 year olds on Universal Credit will have to apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement six months after the start of their claim
- Rents for social housing will be reduced by 1% a year for four years and tenants on higher incomes (£30,000) will be required to pay market rate, or near market rate rents
With an aim to support working families, starting September 2017, working families with three and four-year-olds will receive 30 hours free child care, doubling what is currently available.
From April 2017, Inheritance Tax will also change. Individuals will be offered a family home allowance so that it can be passed from generation to generation tax-free.
In regards to the property market, changes will be put in place for individual landlords restricting their tax relief to 20% (currently 40%) by 2020.
For retailers, the Chancellor proposed that local authorities have more powers over relaxed Sunday trading times, but local retailers have had mixed views on the plans.
The Chancellor has promised three million new apprenticeships will be created by 2020, which will be funded by a levy on large employers saying that “firms that offer apprenticeships can get more back than they put in.”
Future students will also benefit by an increase in cash support available to them and new maintenance loans will replace student grants that do not need to be paid back until graduates earn above £21,000.
For more changes in the Summer Budget that relate to business, subscribe to Lincolnshire Business magazine to get it delivered to your inbox every Friday morning.
Councillor Colin Davie, Executive Member for Economic Development at Lincolnshire County Council, said: “Clearly, the chancellor is working hard to reduce the nation’s debt, and the unfortunate consequence of that is reductions to public services everywhere, including Lincolnshire.
“As Councillor Hill has already explained, the county council continues to work hard to make savings and we have been successful at doing so. However, further reductions will have an impact on services to the Lincolnshire public and we will continue to make the case for Lincolnshire’s ‘fair share’.
“Although the majority of this budget is about making savings, and about changing the way that some elements of the welfare and taxation systems operate, the chancellor has explained that the government will promote enterprise during this term.
“That is very welcome, and it helps to grow business – thereby creating jobs and generating additional revenue for investment in public services.
“Training, and increasing the uptake of apprenticeships in particular, has been identified as a priority by the chancellor. We have already identified that greater Lincolnshire’s employers will create 200,000 jobs by 2020.
“Lincolnshire contributes greatly to the nation, creating £12 billion of economic value per year and growing, and remaining a steady source of growth in times of economic uncertainty.”