Budget 2014: what does it mean for you?


Budget 2014

In this Budget, George Osborne was faced with his usual challenge of demonstrating to voters that he is there to support them through the 'cost of living crisis' - without actually having any more money to spend on them.

Yet, despite this, he managed to pull off a few crowd-pleasers - not least for businesses, savers and pensioners.

The economy

There was some good news on this front. The OBR revised its growth prediction to 2.7% in 2014, 2.3% growth next year, 2.6% the year after, and 2.5% the year after that. It means that the UK is growing faster than any other major developed economy. The pace of employment, meanwhile, has increased three times faster than in any other recovery - there are 1.3 million more people in work, reducing unemployment from 8% to 5%. The structural deficit will be reduced to zero by 2019 and the National Debt has been revised down to 74.5% of GDP this year, and although it then rises, it will back down to 72.2% in 2018/19. Osborne says that this means borrowing £24 billion less than expected - which he calculated will save every family £2,000 in interest.

Bad news: spending

There was more tough news for public pay and pensions, implementing proposals for properly valuing public sector pensions, and continuing pay restraint. Osborne said there would be more spending cuts in the coming parliament, and that a permanent cap on welfare spending (excluding state pensions and unemployment benefit) would be introduced. It means that in future if any government wants to spend more on welfare they have to put it to parliament.


A clamp down on tax avoidance was identified as another source of revenue. This included a number of measures including an up front tax for people who put their money into tax-avoidance schemes, increasing HMRC's budget for chasing up unpaid tax, clamping down on large companies moving money about in order to pay less tax, increasing the taxman's powers to collect unpaid tax from accounts, and stopping people from buying property through companies in order to save tax - by introducing 15% stamp duty on any house worth more than £500,000 bought through a company.

Giveaways: charity

Osborne expanded the number of groups that will benefit from the fines banks are paying for manipulating Libor. Alongside the military charities there will be help for search and rescue, lifeboats, scouts, guides, cadets and St John's Ambulance.

He also pledged no IHT for service personnel who die in their duties, no VAT on fuel for air ambulances and a new air ambulance for London. There will also be funding for Survivors for Peace, scholarships for Lockerbie, £20 million to repair cathedrals in time for the WWI commemoration services, and a grant to commemorate the 800th anniversary of the signing of the Magna Carta.


Support for businesses came through a number of channels. There will be more competitive export finance - doubling the lending available to £3 billion and cutting rates by a third. There will be cuts to air tax duty too on long haul flights - paid for by introducing private jets to the system. There will also be start up funding for new routes to provincial airports.

There will be an extension to the business rate discount and enhanced capital allowances in enterprise zones for another three years, and the first enterprise zone in Northern Ireland.

There will be a number of new allowances, including tax relief for social enterprises and creative industries.

For manufacturers there will be a £7 million package to cut energy bills. This is also likely to save the consumer £15 a year on their energy bills.

But the most generous announcement here was that the annual investment allowance will double to £500,000 to the end of 2015 - so that 99.8% of all businesses get 100% of the investment allowance - which will cost the government £2 billion and is a major step.


On Monday Osborne announced he was extending the Help to Buy equity loan scheme until 2020 - helping 120,000 more households into a new-build home. The scheme had originally been set to end in 2016. This scheme means that the government will lend buyers up to 20% of the cost of a new-build home so a buyer only needs a 5% deposit and a 75% mortgage from a commercial lender.

He also announced there will be a new garden city built near Ebbsfleet in Kent. It will provide 15,000 more homes.

Today he introduced other measures, including funding support for people building their own home, money for the regeneration of inner city estates and for new homes in Barking and Brent Cross.


Osborne announced £270 million for the Mersey Gateway, new borrowing and taxation powers for the Welsh Assembly to raise money to spend on infrastructure, £140 million for better flood defences and £200 million for potholes.


There will be new centres for cell therapy and graphine, as well as an Alan Turing Institute for big data and algorithm research. There will also be more grants to small businesses for 100,000 more apprenticeships, and new graduate level apprenticeships.


Yesterday Osborne announced more details of the tax-free childcare that had been mentioned in the Autumn Statement - which will launch in autumn 2015. It offers 20% tax relief on the first £10,000 of childcare costs - which is up to £2,000 support for each child each year.

It will replace the current voucher scheme, and has the advantage it is now available to people whose employers didn't run a scheme and the self-employed. However, it is limited as it is not available to those who are on tax credits, earn more than £150,000 each, or families where only one parent works.


There were some lollipops here. The fuel duty rise planned for September will be axed.The tax on fixed odds gambling machines will be increased to 25% but the tax on bingo will fall from 20% to 10%. Tobacco duty will be increased by another 2%, and the tobacco duty escalator will be extended through the next parliament. Alcohol duty, meanwhile, will only rise along with inflation - and there will be notable exceptions including Scotch whisky and Somerset cider which will see duty frozen, and duty on a pint of beer cut by 1p for the second year in a row.

Tax: the personal allowance

As predicted, the Chancellor announced that after the planned increase to £10,000 this year, the personal allowance will rise again next year to £10,500 - so you can earn £10,500 before you pay a penny in tax. He estimated that this will mean £800 less will be paid in tax by the typical taxpayer since the coalition government took power. The transferable tax rate for married couples will be linked to this level.

The only change for the 40% tax band was increasing the threshold from the current £41,450 to £41,865 in 2014/15 and to £42,285 in 2015/16. This is a far cry from rumours that it could be scrapped altogether.


Osborne produced his rabbit out of the hat for savers, announcing that "support for savers is at the centre of this budget" This took three forms.


From 1 July Osborne will merge cash ISAs and stocks and shares ISAs into one single ISA, allowing people to transfer their old ISAs from either type into the new format. The overall annual limit will also be increased to £15,000. This is a major change for savers - many of whom have exhausted their cash ISA limits and not touched their stocks and shares ISA limit for years. The annual limit for Junior ISAs will also rise to £4,000.

Pensioner Bond

Osborne will introduce a pensioner bond, available through National Savings and Investments to everyone over the age of 65. The rate will be set in the autumn but is likely to be around 2.8% for a one-year bond and 4% for a three year bond. There will be £10 billion issued and a savings limit of £10,000 in each.

The premium bond savings limits will also rise from £30,000 to £40,000 this year and £50,000 next year, and the number of million pound winners will be doubled.


The rules on defined benefit pensions will be laid out later, but for defined contribution pensions there will be massive changes - which will be in place for April 2015.

There will be no requirement to ever buy an annuity for most savers. The income requirement for flexible drawdown will be reduced from £20,000 to £12,000. The capped drawdown limit will be raised from 120% to 150%. People will be able to draw down as much or as little as they want at any time they want.

The total pension savings that can be taken as a lump sum will be increased from £18,000 to £30,000, and the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) has increased from £2,000 to £10,000 - while the number of personal pots that can be taken under these rules rises from two to three.

There will be a new right to face-to-face advice on retirement, to advise people on the best way to secure a retirement income, and anyone who chooses to buy an annuity will receive help in shopping around for the best rate.

The tax free lump sum people can take on retirement will stay at 25%. However, instead of being taxed 55% on any additional sums they take out of a pension, people will be taxed at their marginal rate - which for basic-rate ratepayers will be 20%. This is likely to vastly increase the sums people take - which will boost tax income for the government.

And the starting rate of 10% on income from savings will be scrapped - so there's no tax on the first £5,000 of income from savings.

New pound coin

And for a shiny new twist, Osborne has been able to unveil a new pound coin - which will enter circulation in 2017 and combat the problems of counterfeiting with the current coin. The 12-sided gold and silver coloured coin has apparently been modelled on the old threepenny bit.