The Chancellor today confirmed plans to increase the increase the amount families can leave loved ones after their death without paying inheritance tax in a Budget which he said was focused on moving Britain away from a “low wage, high tax, high welfare economy”.
However, while some commentators in the financial services industry welcomed the news on IHT, others expressed disappointment at news that the rate of insurance premium tax (IPT) would double, although the protection industry remains exempt.
The widely-expected move on IHT will raise the threshold for family homes to £1m from £650,000 after April 2017.
The Chancellor said the move was part of a Budget which was “a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create”.
The Chancellor also said £12bn would be sliced off the country’s welfare bill, including a reduction in the £26,000 benefit cap – the amount one household can claim in a year – to £23,000 in London and £20,000 in the rest of the country.
But while he announced a number of other initiatives to cut the country’s welfare bill, he said disability benefits will not be taxed or means-tested and the rate of Employment and Support Allowance paid to those deemed able to work to be aligned with Jobseekers’ Allowance for new claimants. Critics, however, said some disabled people could still be worse off as a result when the implications of the Chancellor’s overall plans to cut welfare are considered.
But while today’s Budget focused on cutting the welfare bill, the Chancellor also said he was giving Britain a “deserved pay-rise”. Middle class families would benefit through changes to the 40p rate of income tax, while those on lower incomes would also benefit from the introduction of a national living wage.
The Chancellor’s surprise move to introduce a national living wage of £9 by 2020 raised raucous cheers from the Tory benches and saw Work & Pensions Secretary Iain Duncan Smith punch the air in delight.
In the run up to the election which led to today’s first Conservative-only Budget since 1996, Labour had said it would set the compulsory wage limit at £8 by 2020. But today the Chancellor said the figure would in fact start at £7.20 next April and rise to £9 an hour by 2020.
Labour acting leader Harriet Harman said working families would suffer despite the Chancellor’s pledge of a national living wage,.
She said the government’s rhetoric was “liberated from reality” and her party would give “serious consideration” to some measures and be a “different kind of opposition”.
In other announcements today, the Chancellor also said the NHS will receive a further £8bn by 2020 as it was clear that the under-pressure health service is in need of additional Government funding.
That means it would be getting the extra money on top of the £2bn already committed.
Referring to NHS England’s Five Year Forward View, which had called for the extra cash, Osborne told MPs: “That plan requires very challenging efficiency savings across the health service, which must be found.
“But it also requires additional Government funding.
“Our balanced approach means I can today confirm the NHS will receive, in addition to the £2bn we’ve already provided this year, a further £8bn.
“That’s £10bn more a year in real times by 2020.
“It’s proof that you can only have a strong seven-day NHS if you have a strong economy and it’s proof that the NHS is only truly safe in Conservative hands.”
The rate of IPT, meanwhile, is to be raised from, November 2015 from 6% to 9.5%, although the protection sector remains exempt.
Huw Evans, director general of the Association of British Insurers said IPT is “a tax on people and businesses”.
He said: “it’s very disappointing to see a more than 50% tax increase being imposed on consumers, especially when the insurance industry and Government has worked so hard in recent years to bring down the cost of essential insurance.”
In other news, meanwhile, the National Insurance employment allowance for small firms to be increased by 50% to £3,000 from 2016.