Key Highlights: 

• 2015/16 personal allowance                                                    £10,600
• Annual investment allowance until 31 December 2015            £500,000
• Corporate tax rate from 1 April 2015                                         20%
• A further £15 million support for UKTI activities in China
• Increased flexibility and reduced tax for savers
• Reiteration of existing measures to reduce employer's National Insurance contributions

Supporting Businesses to Grow and Invest

In his Budget speech, the Chancellor recognised the value of the Annual Investment Allowance (AIA) in encouraging UK businesses to invest by noting that the scheduled reduction from £500,000 to £25,000 from 1 January 2016 would not be remotely acceptable to businesses. However, he deferred making any further commitment to maintain the current level of this valuable incentive until the Autumn Statement.

We welcome the Chancellor's announcement of a doubling in the resources available to UK Trade and Investment to support potential exporters to China, but believe the Chancellor should have taken the opportunity to introduce wider and more significant measures to promote exports more generally. For example, in both our Autumn Statement and Budget wishlists, we have called for the Chancellor to issue a consultation on the introduction of targeted tax relief for UK businesses for the initial costs of researching and entering into new export markets.

In our Budget wishlist we called for the rapid implementation of all of the Office for Tax Simplification (OTS) recommendations, including the raising of the thresholds for transfer pricing and for quarterly instalment payments. While the Chancellor recognised the fantastic work of the OTS, disappointingly he has not taken the opportunity to implement many of its recommendations to reduce the regulatory burden for mid-size businesses.

Encouraging Savings

The Government has announced further encouragement for individuals to invest in their savings. Firstly, the introduction of a new Personal Savings Allowance from 6 April 2016 will create a generous tax free allowance of £500 for higher rate taxpayers, and £1,000 for basic rate taxpayers on interest generated from savings income. This new allowance is expected to benefit 95% of taxpayers, making them exempt from paying any tax on the interest element of their savings income.

Secondly, from 6 April 2016, individuals who already have an annuity will be able to effectively sell it on and be chargeable to income tax at their marginal rates, instead of paying tax of 55% on the cash lump sum. This is an extension to last year's Budget announcements which provided greater freedom for individuals accessing their pension savings. This new announcement will benefit up to five million pensioners. On a less encouraging note, from 6 April 2016, the Lifetime Allowance for pensions tax relief will reduce from £1.25 million to £1 million, and will be indexed to increase by the rate of inflation from April 2018.

Thirdly, following a technical consultation with ISA providers, the Government will introduce new rules in autumn 2015 which will provide greater freedom to individuals making savings into and drawings out of their ISA account. Individuals will be able to make drawings out of their ISA account and make deposits back into their account without losing their ISA tax benefits, as long as the money is deposited within the same financial year up to the maximum limit, which is £15,240 in 2015/16.

Lastly, in order to help first time buyers save for a deposit, the Government will  introduce a Help to Buy ISA from Autumn 2015. The Help to Buy ISA effectively provides a 25% top-up for first time buyers, and is undoubtedly welcome news to aspiring homeowners. The top-up is capped at £3,000 (for those saving £12,000). This ISA will be available per person rather than per property. Unfortunately, the measure fails to deal with the current housing shortage and the lack of supply of suitable housing. Therefore, we are concerned the boost provided through these measures could result in higher demand and ultimately lead to higher house prices. 

Grant Thornton welcomes these announcements which provide greater incentives for individuals to both save and access their savings tax efficiently.

The Battle for Talent

The Chancellor noted in his speech that the abolition of employer's National Insurance contributions (NICs) for employers of under 21s and for young apprentices (under 25s) will go ahead from 6 April 2015 and 2016 respectively and that over one million employers have benefitted from the NIC Employment Allowance. We welcomed these measures when announced and had called recently for the NIC abolition to be extended to cover all apprentices.

UK businesses reported increasing skills shortages in the most recent Grant Thornton/ICAEW Business Confidence Monitor. We see the reduction in the employer's NIC costs for young apprentices as a step towards ensuring business have the employees with the right skillsets and we would encourage the next Government to be braver in cuts to NIC for apprentices to develop a more highly-skilled UK labour market.

The Chancellor has recognised the value that apprentices bring to the UK economy by raising apprentices' hourly rates from October 2015, resulting in a salary increase in excess of £1,000 for a full-time apprentice.

We are pleased to see the Government's response to our request to give employers more direct control of apprenticeship funding through the introduction of an Apprenticeship Voucher from 2017. This will give employers the purchasing power to have an even greater say in the quality, value for money and relevance of the training that their apprentices receive.

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