July Budget 2015: From benefits caps and child tax credits cuts to pension and inheritance tax changes, here's what to expect

 
James Nickerson
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This is the first Conservative majority Budget since 1996 (Source: Getty)

Tomorrow, George Osborne takes to the despatch box for his first truly Conservative Budget - indeed, the first majority Conservative Budget since 1996. The chancellor is notoriously good at trailing the contents of his Budgets before he stands up - so what do we know so far?

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Cuts to the welfare bill

  • The chancellor has insisted he is going to cut £12bn from the annual welfare budget in two years, as part of a bid to balance the books. That’s out of a total welfare bill of £220bn, which includes benefits, tax credits and state pensions.
  • The Prime Minister has vowed to protect £95bn of pensions and universal benefits, including child benefits. So, that £12bn will be cut mostly from those of working age payments, likely to be child tax credits and housing benefits. "He's announced about £2bn [of cuts] and we know nothing about where the further £10bn are coming from," said Paul Johnson, director of the Institute for Fiscal Studies (IFS).

So, looking for other cuts, here is a look at what hasn’t been explicitly protected:

Some combination of those benefits must be cut if the government is to reach its £12bn reduction. That's likely to come from:

  • Child tax credits: around four million people receive them, getting £545 per year as a flat rate payment, plus up to £2,780 per child. The PM has already said he wants to stop this “merry-go-round
  • Subsidised housing: 340,000 people who live in housing association and local authority properties on incomes of more than £40,000 in London and £30,000 in the rest of England will have to start paying market rents, or at least close to market rents, from 2017-18
  • Benefits caps: This is currently £26,000 across the country, which the government plans to cut to £23,000 in London and lower (around £20,000) across the rest of the country
  • Housing benefit: could be taken from 18-21 year olds who are also claiming jobseekers’ allowance

Other areas

  • The BBC will be expected to take on the £650m per year it costs for providing free television licences for the over 75s, by making cuts to its budget
  • A clampdown on non-domicile residents, which the government will pursue against tax evasion and aggressive tax avoidance to attempt to raise £5bn
  • The inheritance tax threshold will increase to £1m for couples from 2017. The “family home allowance” is worth £175,000 per person, in addition to the £325,000 tax-free allowance. Estates of individuals who die and pass on assets worth up to £500,000, including a home, will be charged no inheritance tax whatsoever
  • The Conservative manifesto pledged to alter the amount that can be put tax-free each year into private pension pots, which is likely to mean anyone earning £150,000 a year will be able to put £40,000 a year into their pension. On a sliding scale, those earning £210,000 a year will be able to put £10,000 away
  • The BBC has reported that the UK’s main sickness benefit, Employment and Support Allowance, could be scrapped
  • An estimated £30bn will be cut from unprotected government departments
  • Shops across the country will be able to stay open for longer on Sundays

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What's less likely

  • The top rate of tax is unlikely to fall to 40p, despite calls from Conservative MPs
  • The government has ruled out increases in VAT, income tax and national insurance contributions

Announcements from previous Budgets

  • Personal allowance to increase from £10,600 in 2015-16 to £10,800 in 2016-17. By the end of this parliament, the government has said this figure will reach £12,500
  • Tax-free personal savings allowance to apply for the first £1,000 of interest earned on savings for basic rate taxpayers, and the first £500 for high rate taxpayers from April 2016
  • The amount that can be saved in a tax-free pension over the course of a lifetime will fall from £1,25m to £1m from April 2016
  • The National Minimum Wage is to increase by 20p an hour to £6.70 from October
  • The threshold for paying the 40 per cent rate of income tax is to rise from £42,385 to £43,300 in 2017-18. By 2020-21, the Conservative manifesto said this number will rise to £50,000
  • A Help to Buy ISA will launch in the autumn, where the government will top up every £200 saved for a deposit by £50, up to a top –up limit of £3,000

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