George Osborne delivered his first Budget for an all-Conservative government this afternoon. While the focus was predominantly on welfare and other Government spending, there were also some measures that will directly affect businesses - not least a compulsory living wage and a cut in corporation tax.
Osborne is expected to make a bid for his party's leadership when David Cameron stands down before the end of this parliament, so he will be keen to make a real mark.The Budget was billed as one to take Britain from a high-spending, high-welfare, low-wage economy to one that's vice versa. Many will question whether the tax cuts and wage increases will make up for the impact of welfare and departmental cuts but one thing Osborne can't be accused of is lacking boldness.
Compulsory national living wage
Osborne will introduce a new, compulsory, national living wage. Starting next April businesses will have to pay workers aged over 25 at least £7.20 per hour, rising to £9 by 2020. Small businesses will have a national insurance bill cut to compensate. Opponents will point out that's actually lower than the £7.85 living wage rate specified by the Living Wage Foundation, and that the living wage in London should be much higher, but it's nonetheless a massive increase from the current minimum wage of £6.50.
The Government will continue to cut corporation tax - it will fall to 19% in 2017 and 18% in 2020 - one of the lowest rates of any major developed country. Osborne will also introduce a new dividend allowance of up to £5000 but impose higher taxes on dividend income beyond that.
Large businesses will have to pay an unspecified 'apprenticeship levy' to fund training for workers. Those who train a lot of apprentices will get back more than they pay in.
After introducing the bank levy, a charge on banks’ global balance sheets, and increasing it throughout the last parliament, Osborne said he will be reducing it every year until before phasing it out and replacing it with a new 8% surcharge on bank profits.
Local authorities that take on a greater amount of devolved powers will be able to set their own Sunday trading laws. That’s likely to be a boon to supermarkets and other large stores but could pose a problem to convenience stores.
Higher rate taxpayers with buy-to-let properties will only be able to get mortgage tax relief at the basic rate.
As expected, the inheritance tax threshold will effectively be raised to £1m. The tax-free personal allowance will raise to £11,000 next year and the higher rate threshold will increase to £43,000 from next year - this means 29 million people will pay less tax, Osborne says.
Annual Investment Allowance
The tax break on business capital investments will go up to £200,000 per year.