George Osborne MP: Government reforms providing opportunity and security
5 min read
Writing exclusively for PoliticsHome, the Chancellor of the Exchequer sets out why his range of tax, pensions and savings reforms that came into effect today represent some of the biggest and most fundamental reforms for years.
This Government is determined to make sure that everyone is offered opportunity and economic security at each stage of their life.
That’s why today, we’re taking more action to make sure that people can keep more of the money they earn, are encouraged to save and are offered dignity in retirement.
A whole range of reforms to taxes, National Insurance allowance, pensions and savings came into effect at midnight.
Over 18 million people putting money aside will benefit from a tax cut, as our new personal savings allowance comes into force. It will take 92 per cent of savers out of savings tax altogether.
It’s the biggest savings shake-up for a generation, and means that from today most UK adults will be able to earn up to £1,000 interest a year on their savings without paying tax on it.
Currently, for every £100 interest they earn, basic-rate taxpayers lose £20 in tax, and higher rate taxpayers £40. Yet from today the new personal savings allowance means every basic rate taxpayer can earn £1,000 interest a year without paying tax on it, delivering a maximum tax saving of £200, and higher rate taxpayers £500 interest tax free, meaning the same saving of £200.
At the same time, there are new ISA flexibilities – allowing people to withdraw and replace money as they like, without affecting their annual limits.
From next April, we’ll go further, launching the new Lifetime Lisa, or LISA, which will mean younger workers aged 40 or under no longer having to choose between saving for a home or retirement, and getting a bonus of up to £1,000 a year from the Government.
In the last Parliament we took four million of the lowest earners out of paying tax altogether, and at the general election we promised we would go even further.
So today the income tax free personal allowance increases again from £10,600 to £11,000, giving an £80 tax cut to a typical taxpayer, cutting income tax for over 30 million taxpayers and taking 680,000 out of paying income tax altogether.
Today a typical basic rate taxpayer will pay £905 less tax in April 2016 as a result of changes made since 2010, and a typical higher rate taxpayer will pay £818 less - something I’m very proud of. And next year both the personal allowance and the higher rate threshold will rise again, to £11,500 and £45,000, meaning more money in people’s pockets.
All this builds on our new National Living Wage, which came into force, by law, at the end of last week. It means a typical worker aged 25 or over who is working 30 hours a week on the National Minimum Wage will see their take home pay increase by £730 as a result of the combined effects of the introduction of the National Living Wage and the increase to the income tax personal allowance.
Also starting today is the most fundamental reform of the state pension since its inception more than a century ago. The new state pension being introduced for those reaching pension age from now on will, for those who have paid in or gained credits by spending time caring for a family, mean an income of £155 a week, or over £8,000 a year.
Our state pension system had become hugely complicated and hard to understand. The new state pension means that, at last, people will have certainty in what they can expect from the state in old age – and for many -- women and the self-employed in particular -- it will be more generous.
Over 75 per cent of women and over 70 per cent of men stand to gain in the first 15 years. By 2030, over three million women will be significantly better-off, gaining an average of £550 extra per year as a result of these changes.
We know that fuel is a big cost for families and businesses – and both will gain from our decision to extend the freeze in fuel duty. People renting out a room in their house will gain from a big increase in tax-free rent-a-room relief to £7,500 a year, and married couples will benefit from an increase to the marriage allowance.
We’re going on backing business – because we’re determined to see Britain going on creating good new jobs. We are backing the new generation by abolishing the jobs tax on young apprentices altogether. When a business is giving a young person an opportunity in life this government will support them, not tax them.
In my Budget last month, I announced that we are permanently taking 600,000 small businesses – a third of all businesses in the UK – out of paying business rates. We’re going on cutting corporation tax, to the lowest level in the G7, and rewarding people who invest in businesses.
So with everything happening this week, you see a government that’s making work pay, cutting taxes for workers and the businesses that create the jobs they need, backing savers, helping drivers by ensuring they pay less in fuel duty, and ensuring dignity and certainty in retirement.
It’s a modern, compassionate, radical Conservative government in action.
George Osborne is the Chancellor of the Exchequer and the Conservative MP for Tatton
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