this level, delivering year-on-year real cuts for motorists. The average driver will save around £75 every year in duty compared to pre-2010 fuel duty escalator plans.
Insurance premium tax
The standard rate of Insurance Premium Tax (IPT) will be increased from 9.5% to 10%. This ensures that the impact of the rate increase is spread broadly across the entire general insurance industry. IPT is a tax on insurers. However, if they do pass the cost of this rate increase on to their business and household customers, the average combined home and contents insurance would only increase by £1 and the average motor insurance premium by £2 per year.
All the revenue raised from this increase in IPT will be invested in flood defence and resilience measures.
National Minimum Wage/National Living Wage
National Minimum Wage (NMW)
The government will set the main rate of the NMW, which applies for workers aged between 21 and 24, at £6.95 from October 2016, in line with the Low Pay Commission’s recommendations. This increase means the main NMW rate will reach its highest ever level in real terms. The government has also accepted the LPC’s recommendations for the youth and apprentice rates. October 2016 will see:
a 3.7% increase in the rate for 21 to 24 year olds (from £6.70 to £6.95 per hour) a 4.7% increase in the rate for 18 to 20 year olds (from £5.30 to £5.55 per hour) a 3.4% increase in the rate for 16 to 17 year olds (from £3.87 to £4.00 per hour) a 3.0% increase in the rate for apprentices (from £3.30 to £3.40 per hour) a 12.1% increase in the accommodation offset (from £5.35 to £6.00 a day).
Alignment
The government will align the National Minimum Wage and National Living Wage cycles so that both rates are amended in April each year. This will take effect from April 2017.
Pension reforms
Lifetime ISA for adults under 40
From April 2017 all savers will be able to put up to £20,000 a year into ISAs, up from £15,240 at the moment. But in addition, the Chancellor has announced the introduction of a Lifetime ISA from April 2017. This is available to individuals under the age of 40 and will attract a 25% bonus from the government.
Savers will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50.
Savers will be able to withdraw money from a Lifetime ISA at any time, without paying any tax on it. Those wanting to use the money to buy a home will be able to do so after just a year; those wanting to use it for retirement will have to wait until the age of 60. Accounts are limited to one per person rather than one per home – so two first time buyers can both receive a bonus when buying together. For anyone with a Help to Buy: ISA they can transfer those savings into the Lifetime ISA in 2017, or continue saving into both – but they will only be able to use the bonus from one to buy a house. The Lifetime ISA can also be used to save for retirement. Savings can be withdrawn tax-free after the saver’s 60th birthday. Money can be withdrawn at any time before the saver turns 60, but the government bonus (and any interest or growth on this) will be lost.
CIPP comment Before the Budget there was huge speculation that the Chancellor would completely reform pension saving and introduce an ISA-style pension to replace traditional pensions, however only a few days before the Budget we were told that this idea had been rejected for the time being. However, today’s announcement of a Lifetime ISA does bear some similarities to that idea.
CIPP Policy News Journal
25/04/2016, Page 177 of 453
Made with FlippingBook - Online magazine maker