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pound coins(Note: this piece was published in 2015. Content and information is relevant to the time of publishing) .

With the election less than six weeks away, there was a lot riding on the final budget before the election. The polls show that the budget was really well received with a 3 point bump for the Tories in the days since Osborne announced his policies for the future. Although the recovery has been slow and opposition parties are keen to point out that average incomes are lower than in 2010, the Conservatives are keen to point out that thanks to changes in income tax, real disposable incomes are now £900 higher than in 2010.

Key points from the budget:

  • A ‘post-austerity’ growing economy all the way to prosperity – the forecast of GDP for this year has been revised upwards to 2.5%, giving Britain the 2nd strongest growth of all G7 members after the USA.
  • A higher tax threshold – an increase in the personal tax free allowance to £10,800 next year and £11,000 in 2017 (+3.8%); taking many lower paid and part-time working people out of tax altogether and providing an extra £200 for 24 million basic-rate taxpayers. The lower paid 50% of earners now pay a smaller proportion of income tax than at any period under the previous government; the highest paid, 1% of the population now pay 27% of all income tax, up from 25% in 2010.
  • Higher tax threshold for middle earners – the threshold for the upper 40% tax band increases above inflation from £42,385 to £43,300 which benefits lots of hard working families in our constituency.
  • Getting Britain back to work – We will see the minimum wage rise by 3% and apprentice pay rise by 20%.
  • A higher reward for savings – recognising the long-term value to the economy that comes from savings and investment, a new personal savings allowance will be introduced whereby the first £1,000 earned is tax-free [£500 for higher rate taxpayers] – removing 90% of savers from taxation; people will be given the freedom to choose how they use their pension savings.
  • Help for first-time home buyers – the Help to Buy ISA will offer the chance to first-time buyers to save tax-free, like a pension, towards a deposit on a house, ensuring long-term saving is rewarded at all stages of life. This tax relief means that saving £200 gets topped up to £250 meaning people saving £12,000 will get £15,000 after the Government’s contribution.
  • Supporting small business owners – Class 2 National Insurance contributions will be abolished for all the self-employed, and the annual tax return will cease to exist, helping small business owners to concentrate on running their business. Corporation tax will be reduced to 20% ensuring Britain’s businesses can compete globally.
  • Tax on “diverted profits”– to come into effect next month, aimed at multinational firms moving profits “artificially offshore”; a policy that will please many who were frustrated with the unfair tax policy for certain businesses.
  • Annual bank levy to rise to 0.21%– raising an extra £900m in Tax revenue. Banks will also be barred from deducting compensation for mis-selling from corporation tax

Critics of the Government have pointed out that the Chancellor’s plans for the five years after the election would include further austerity cuts. Although we do not yet know where these cuts would fall, we do know that austerity under Osborne would continue for the next few years. We have another six weeks to see if the budget will have made a difference to the outcome of the election, but for now, the Tories will be feeling rather happy with how their budget was received.

All views and ideas represented in this blog post are exclusive to Resham, and do not represent those of any other third party.

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