What should we expect from the Emergency Budget?
2 Jul 2015 | COMMENTS: 0 | Author: Ryan Smith | General
Next week, on 8th July the Chancellor, George Osborne will host his Summer budget. Referred to as the Emergency Budget as it comes so close following the Conservative’s victory at this year’s General Election, Osborne will be looking to cut around £12 billion as outlined in the Tory’s party manifesto.
Osborne and the Conservatives are desperate to try and clear the UK’s debt, which currently stands in the region of £1.5 trillion, so as well as some hefty cuts, we could also see changes introduced that may have been blocked by the Lib Dems during the Coalition government’s time in power, which coincided with the 2015 Budget earlier this year.
Here’s what we expect the Chancellor to announce next week.
Cuts to Pensions Tax Relief
There are plans in place to reduce the amount of tax relief available to the highest earners, cutting it from £40,000 to £10,000 a year.
For a high earner of around £210,000 or higher, this could mean a loss of around £13,500 in the tax relief offered on their pension contributions.
Some also believe that the government will introduce a simpler 30 per cent flat-rate of tax relief to all pension contributors, in order to simplify the whole process; it’s not likely that this will be introduced this soon.
A ban on salary sacrifice or a cut to National Insurance relief currently granted to employers could also be announced, which could be a quick way for the Chancellor to raise hundreds of millions of pounds – possibly even billions – but would be unwelcome news to employers or pension scheme members.
Cuts to Child Tax Credits
Credits available to working families also look to be dramatically cut.
The Chancellor is said to want to cut the credits back to 2003/2004 levels, saving £1.5 billion and supposedly incentivising parents back in to work.
But with childcare fees taking huge chunks of many working family’s income already, this could see a huge financial impact on many – around 3.7 million low income families could lose around £1,400 a year according to the Institute for Fiscal Studies.
At a time when more and more people are on low incomes and still struggling to make ends meet, this could spark a huge backlash from many.
Further Spending Cuts
The government need to save around £1 in every £100, so we could see cuts to schools and further cuts to the NHS – despite the fact he wants to increase the 40 per cent tax threshold from £42,385 to £50,000.
He must also increase the personal allowance up to £12,500 over the next few years as promised, as well as not raising income tax, VAT or national insurance. There’ll also be cuts to inheritance tax, cash to help first time buyers and a freeze announced on rail fares and TV licence fees.
Local Financial Advice will have a full update on the Emergency Budget following the Budget speech on 8th July.
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