Chancellor of Exchequer George Osborne with the famous Budget Day red box. Photo: HM Treasury

George Osborne delivered his sixth budget on 18 March 2015 and announced tax breaks for savers, a planned reduction of the Pension Lifetime Allowance with future plans to index this to inflation, an increased tax-free personal allowance and the additional flexibility in accessing ISA savings among other things. The most relevant highlights for expatriates from the Budget are outlined below.

Growth
Osborne stated that the central theme of the budget was to use all additional resources to further reduce debt. More Britons are working and households on average will be around £900 better off in 2015 than they were in 2010. The Office for Budget and Responsibility (OBR) expects unemployment this year to fall to 5.3% – down 3% from 2010.

OBR forecasts GDP growth in 2015 at 2.5%, up from the forecast of 2.4% at the Autumn Statement. OBR believes that the economy will expand by 2.3% for the next three years. Inflation is now forecast to fall to 0.2% this year compared to the December forecast of 1.2%.

Borrowing and Spending
The IMF recently stated that the UK has achieved the largest, most sustained reduction in their structural deficit than any major economy. The OBR confirmed that it now stands at less than half the deficit that the government inherited.

The National Debt as a share of GDP will fall in 2015/16 for the first time since 2001. It is projected to be 80.4% in 2014/15 and 80.2% in 2015/16. By 2019/20 it is forecast to fall to 71.6%.

Small Business
Corporation tax is set to be cut to 20% for TY2015/16. In order to make self-employed tax affairs simpler for individuals, the Chancellor announced that the government is removing the need to complete a self-assessment tax return every year in favour of the ability to automatically upload information into new digital tax accounts.

Personal Allowance
The Personal Allowance for TY2015/16 will be £10,600 with a rise to £10,800 in TY2016/17 and £11,000 the year after. Additionally, Osborne announced that the high rate tax threshold will increase to £43,300 by TY2017/18 as well. These changes represent a commitment to ultimately raise the personal allowance to £12,500 and raise the Higher Rate threshold to £50,000.

Savings and Pensions
It was announced that the pension’s lifetime allowance will be reduced from £1.25 million to £1 million in April 2016. There are plans to index the Lifetime Allowance to inflation in 2018.

From April 2016, a new Personal Savings Allowance will be introduced. This allowance will entitle the first £1,000 of interest earned on all savings to be tax-free. Higher rate taxpayers will have their allowance set at £500.

It was announced that the New ISAs, along with their increased contribution limits, will be made more flexible, allowing savers to maintain the UK tax-free entitlement if you take a distribution from the account and subsequently put the money back in later in the year. Additionally, the range of investments that are available within an ISA is expected to be expanded later this year. This could potentially spell good news for Americans who hold ISA accounts and need to avoid holding PFICs due to the detrimental US tax treatment.

In addition to the increased flexibility within New ISAs, a new Help to Buy ISA has been introduced to help first time home buyers save for a down payment. For every £200 saved, the government will top up the account with £50.

Andrea Solana is an expert on international tax and global wealth management. She is Head of Advanced Planning at MASECO Private Wealth. Andrea graduated from University of Virginia’s McIntire School of Commerce with a degree in Finance and Management, completed her MBA at Imperial College London and holds her US Series 65 license. MASECO Private Wealth is not a qualified tax adviser and you should seek separate advice on your tax position with a suitably qualified tax adviser.