GEORGE OSBORNE’S much vaunted personal tax allowance changes which see the rate rise to £10,800 next year and then £11,000 in 2017-18, is set to cost the Treasury £5.7bn over the next four years.
The personal allowance is now set to nudge up from £10,000 this tax year to £10,600 next month, adding an additional £600 of tax-free earnings for the majority of employees.
Such moves will cost £960,000 next year, £1.5bn in 2016/17, £1.6bn the year after before rising yet again to £1.7bn in 2019/20.
The 40% tax rate is set to rise from £41,865 to £42,385 on April 6 before liftingonce more to £42,700 in 2016/17 and then another £500 up to £43,300 the year after.
Another big drain on the Treasury’s purse is the announcement of the Help to Buy ISA.
The scheme will deliver a government bonus to those who save into a Help to Buy ISA at the point they use their savings to purchase their first home. It means that for every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum of £3,000 on £12,000 of savings.
Geraint Jones, director, private client tax at BKL Tax, said: “This is a generous concession by the government that will no doubt prove popular with those struggling to buy their first property.”
Meanwhile, Osborne will claw back some £4.3bn from the banks, as Kevin Hindley, managing director at Alvarez & Marsal Taxand, explained.
“To the extent that there have been giveaways in this budget they have again largely been financed by the relatively soft political target political target of the banks,” said Hindley.
“The much telegraphed increase in the bank levy will raise £4.3bn and the more surprising disallowance on costs of payment protection insurance an additional £960m over the five year period.”