Please see below our summary notes from the Chancellor’s speech 18 March 2015 for your information.
State of the economy
UK grew 2.6% in 2014, faster than any other advanced economy but lower than 3% predicted in December
2.5% growth forecast in 2015, up from 2.4% predicted in December, followed by 2.3%, 2.3%, 2.3% and 2.4% in the next four years
Record employment in the UK, with jobless rate to fall to 5.3% this year (down from 8.3% in 2010)
Trade deficit figures “the best for 15 years”
Living standards “higher” than in May 2010, according to OBR data, with households better off by an average of £900 in last five years
Inflation projected to fall to 0.2% in 2015
Public borrowing/deficit
Deficit halved since 2010 as a share of national income
Annual borrowing set to fall from £97.5bn in 2013-14 to £90.2bn in 2014-15, £75.3bn in 2015-6, £39.4bn in 2016-7, £12.8bn in 2017-8 before reaching a £5.2bn surplus in 2018-9
Debt as a share of GDP to fall from 80.4% in 2014 to 80.2% in 2015-16 before falling in every year, reaching 71.6% in 2019-20
Welfare bills set to be an average of £3bn lower each year than predicted in December, and interest charges on government gilts £35bn lower
£13bn mortgage assets from Northern Rock and Bradford & Bingley to be sold and a further £9bn of Lloyds Bank shares to be sold
Further savings necessary – £13bn from government departments, £12bn from welfare spending and £5bn from tax avoidance, evasion and aggressive tax planning
Pensions/older people
Pension pot lifetime allowance to be reduced from £1.25m to £1m from next year, saving £600m annually although only 4% of pensioners affected. LTA level to be indexed from 2018
Annual allowance to be left unchanged at £40k
Law to be changed to allow pensioners to access their annuities (5m people), with 55% tax charge abolished and tax applied at the marginal rate
Alcohol, tobacco and gambling
Beer duty cut by 1p, cider duty by 2% and whisky duty by 2%. Wine duty frozen
Tobacco and gaming taxes to remain unchanged
New horse racing betting right – bookmakers will have to pay for a license to take bets on horseracing no matter where they are located
Energy and fuel
Petrol duty frozen – September’s planned increase scrapped
Personal taxation
The tax-free personal allowance to rise from £10,600 in 2014-5 to £10,800 in 2015-6 and £11,000 in 2016-7
The threshold at which people start paying 40p tax to rise by above inflation from £42,385 to £43,300
Annual paper tax returns to be abolished
Transferable tax allowance for married couples to rise to £1,100 (to affect over 4m couples)
Review of inheritance tax avoidance through “deeds of variation”
Savings
New personal savings allowance – first £1,000 interest on savings income to be tax-free or £500 for higher rate taxpayers
Annual savings limit for ISA increased to £15,240
“Fully flexible” ISA will allow savers to withdraw money and put it back later in the year without losing any of their tax-free allowance
New “Help to Buy” ISA for first-time buyers will allow government to top up by £50 every £200 saved for a deposit.
Armed forces
A further £75m from Libor fines to go to charities for regiments which fought in Afghanistan and Government to contribute towards permanent memorial to those who died in Afghanistan and Iraq and help renovate Battle of Britain memorials
£25m to support army veterans, including nuclear test veterans
Business
Tax on “diverted profits” to come into effect next month, taxes multinational profits “artificially moved offshore”
Annual bank levy to rise to 0.21%, raising an extra £900m; bank compensation payments to be non-deductible items for corporation tax purposes
Supplementary charge on North Sea oil producers to be cut from 30% to 20% while petroleum revenue tax to fall from 50% to 35%.
New tax allowance to encourage investment in North Sea
Review of business rates
Adult, youth and apprentice minimum wage rates to rise
Farmers to be allowed to average incomes for tax purposes over five years.
Consultation on tax relief for local newspapers
Housing/infrastructure/transport/regions
£15m church roof repair fund to be trebled
New powers for Mayor of London over skills and planning
Greater Manchester councils and Cambridge area to be allowed to keep 100% of growth in business rates
New rail franchise for south west of England
Toll for Severn river crossings to be reduced from 2018
Risk warnings
This document has been prepared based on our understanding of current UK law and HM Revenue and Customs practice, both of which may be the subject of change in the future. The opinions expressed herein are those of Cantab Asset Management Ltd and should not be construed as investment advice. Cantab Asset Management Ltd is authorised and regulated by the Financial Conduct Authority. As with all equity-based and bond-based investments, the value and the income therefrom can fall as well as rise and you may not get back all the money that you invested. The value of overseas securities will be influenced by the exchange rate used to convert these to sterling. Investments in stocks and shares should therefore be viewed as a medium to long-term investment. Past performance is not a guide to the future. It is important to note that in selecting ESG investments, a screening out process has taken place which eliminates many investments potentially providing good financial returns. By reducing the universe of possible investments, the investment performance of ESG portfolios might be less than that potentially produced by selecting from the larger unscreened universe.
