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Click here for the gov.uk pages relating to the Treasury and its Budget documents.<

The "Red Book" is the key source of information. It contains the detail of policy including data relating to items not mentioned in the Chancellors speech.  

The Chancellor is likely to refer to the "OBR" or Office for Budget Responsibility. They can be found by clicking here.<

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Sets the level of the welfare cap from 2015-16 to 2018-19 at the OBR’s forecast of spending

in scope, with a forecast margin of 2% above this level; the government is modifying

the Charter for Budget Responsibility to include the new welfare cap alongside the fiscal

mandate – and this will be voted on by the House of Commons.

 

For 2015/16 £119.5 Billion, 2016/17 £122 Billion, 2017/18 £124.6 Billion and 2018/19 £126.7 Billion.

 

As set out at Autumn Statement 2013, the cap will apply to all welfare spending in AME,

with the exception of the state pension and the automatic stabilisers. In future, any new lines of

spending that fall within the OBR’s social security or personal tax credits forecasts and impact

upon Public Sector Current Expenditure (PSCE) will be presumed to be included within the cap.

A full list of expenditure items within the scope of the welfare cap is published at Annex A. The

list of benefits in scope will be published at every Budget. As set out in the modified ‘Charter for

Budget Responsibility’ laid before the House of Commons, any subsequent changes to that list

must be voted on.

 

Within the scope of the Welfare Cap - 

 

Attendance Allowance

Bereavement Benefits

Carer's Allowance

Christmas Bonus

Disability Living Allowance

Employment & Support Allowance

Financial Assistance Scheme

Housing Benefit (except HB passported from JSA)

Incapacity Benefit

Income Support

Industrial injuries benefits

In Work Credit

Maternity Allowance

Pension Credit

Personal Independence Payment

Return to Work Credit

Severe Disablement Allowance

Social Fund - Cold Weather Payments

Statutory Adoption Pay

Statutory Maternity Pay

Universal Credit (except payments to jobseekers)

Winter Fuel Payments

Personal Tax Credits

Child Benefit

Tax-free childcare

 

Outside of scope - 

 

Jobseeker's Allowance and its passported Housing Benefit

Universal Credit payments to claimants subject to full conditionality and on zero income

State Pension (basic and additional)

Transfers within goverment (e.g. Over-75's TV licences)

Benefit Paid from DEL

 

Information in Annex A Red Book page 87.<

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Support for Mortgage Interest (SMI) level to be maintained until 31 March 2016.

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  1. Simplifying the tax system

    1.123 The government’s aim is that the tax system is simple to understand and easy to comply with. Following Office of Tax Simplification (OTS) recommendations, the government will simplify NICs for the self-employed by collecting class 2 NICs through Self Assessment from April 2016, and will implement OTS recommendations to simplify the taxation of employee benefits and expenses, employee share schemes and partnerships.

    The OTS will report this summer on how the competitiveness of UK tax administration can be improved, to help meet the Prime Minister’s aim that the UK rank in the top 5 countries in the world in which to do business. 

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Page 42 Red Book

1.158 From April 2015, the government will change the tax rules to allow people
to access their defined contribution pension savings as they wish from the point of retirement.
Drawdown of pension income under the new, more flexible arrangements will
be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals. The tax-free pension lump sum will continue to be available. Those who continue to want the security of an annuity will be able to purchase one. Equally, those who want greater control over their finances in the short term will be able to extract all their pension savings in a lump sum. And those who do not want to purchase an annuity or withdraw their money in one go will be able to keep their pension invested and access it over time. 

1.160 The government recognises that under the new system it will be important that people are equipped to make decisions that best suit their personal circumstances. The Budget therefore announces that the government will introduce a new guarantee that everyone who retires with a defined contribution pension will be offered free and impartial face-to- face guidance on their choices at the point of retirement. This will take effect from April 2015. To deliver this, the government will introduce a new duty on pension providers and trust- based pension schemes to offer this guidance guarantee. The government will make available up to £20m over the next 2 years to develop this initiative.

1.161 These changes have implications for defined benefit pensions. Defined benefit schemes will continue to offer their members a secure income in retirement, and for the vast majority of defined benefit members that will be the best approach. However, the government recognises that greater flexibility could lead to more people seeking to transfer from defined benefit to defined contribution schemes. For public service defined benefit schemes, this could represent a significant cost to the taxpayer, as these schemes are largely unfunded.

1.162 Having considered this carefully, the government intends to introduce legislation
to remove the option to transfer for those in public sector schemes, except in very limited circumstances. Whilst the government would in principle welcome the opportunity to extend greater choice to members of private sector defined benefit pension schemes, it will not do so at the expense of significant damage to the wider economy. Funded defined benefit schemes play an important role in funding long-term investment in the UK economy, which the government does not want to put at risk. The government's starting point is therefore that, whilst in principle it would like to permit transfers from private sector defined benefit schemes under the new freedoms, it will only consider doing so if the risks and issues around doing so can be shown to be manageable.

1.163 The government has today published a consultation on how best to implement the changes to defined contribution pensions, and how to treat private sector defined benefit schemes. The government is keen to engage with a wide range of stakeholders and the public.58

1.164 As a first step towards this reform, the Budget introduces a number of immediate changes, to allow people greater freedom and choice now over how to access their defined contribution pension. From 27 March 2014 the government will:

  • reduce the amount of guaranteed pension income people need in retirement to access their savings flexibly, from £20,000 to £12,000

  • increase the capped drawdown limit from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity

  • increase the size of a single pension pot that can be taken as a lump sum, from £2,000 to £10,000

  • increase the number of pension pots of below £10,000 that can be taken as a lump sum, from 2 to 3

  • increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000

    1.165 Under the current tax system, people are charged 55% if they choose to withdraw all of their defined contribution pension savings at the point of retirement. This means the majority
    of people instead purchase an annuity and receive taxable income over the course of their retirement. Under the new system, an individual will be able to withdraw their savings at a time of their choosing subject to their marginal rate of income tax. The government anticipates that under these circumstances some people will choose to draw down their pension sooner in order 

    to suit their personal situation. This will increase income tax revenue in the short to medium term.

    1.166 Chart 1.11 shows the projected impact on tax revenues of the measures to introduce greater flexibility and choice to defined contribution pensions. Chart 1.12 shows this impact in the context of wider pensions policies introduced by this government. This shows that the net impact is a saving to the Exchequer of around 1.1% of GDP in 2030, or around £17 billion in today’s terms, putting pensions provision on a more sustainable basis for the long term. 

    1.173 The Budget announces that National Savings and Investments (NS&I) will launch a choice of fixed-rate, market-leading savings bonds for people aged 65 or over, available from January 2015 and allowing inflows of up to £10 billion. These will provide certainty and a good return for those who have saved all their lives and now mostly rely on their savings for income. Interest on the bonds will be taxed in line with all other savings income,

    at the individual’s marginal rate, meaning that pensioners who do not pay savings tax will be eligible to receive the interest tax-free. For the purposes of costing this measure, the central assumption made at this Budget is that NS&I will launch a 1-year bond paying 2.8% gross/ annual equivalent rate (AER) and a 3-year bond paying 4.0% gross/AER, with an investment limit of £10,000 per bond. Precise details will be confirmed at Autumn Statement 2014, to take account of prevailing market conditions at that time. 

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Page 65 Red Book onwards.

  1. Pensions

    2.51 Increased Pension Flexibility – The government will legislate to allow those with a defined contribution pension to draw down from it after age 55 from April 2015, subject to their marginal rate of income tax. (5)

    2.52 Pensions flexibility: financial guidance – The government will ensure that, from April 2015, all individuals with defined contribution pension pots are offered free and impartial face- to-face guidance at the point of retirement and will make available up to £20 million in the next 2 years to develop this initiative. (6) 

  2. 2.53 Pensions flexibility: capped drawdown – From 27 March 2014, the government will allow people with defined contribution pension wealth more flexibility to access their savings by increasing the capped drawdown limit to 150% of an equivalent annuity. (Finance Bill 2014) (5)

    2.54 Pensions flexibility: minimum income requirement change – From 27 March 2014, the government will allow people with defined contribution pension wealth more flexibility
    to access their savings by reducing the minimum income requirement for accessing flexible drawdown to £12,000, subject to their pension scheme rules. (Finance Bill 2014) (5)

    2.55 Pensions flexibility: small pension pots – From 27 March 2014, the government will increase the amount for small individual pension pots that can be taken as a lump sum regardless of total pension wealth from £2,000 to £10,000. (Finance Bill 2014) (5)

    2.56 Pensions flexibility: increase the number of small pots that can be taken as lump sums – The government will increase the number of small pension pots that can be taken as lump sums from 2 to 3. (5)

    2.57 Pensions flexibility: trivial commutation (small pension wealth) – From 27 March 2014, the government will allow people with defined contribution pension wealth more flexibility to access their savings by increasing the total pension wealth that people can have before they are no longer entitled to receive lump sums under trivial commutation rules to £30,000, subject to their pension scheme rules. (Finance Bill 2014) (5)

    2.58 Pensions liberation – The government will legislate to give HMRC broader powers to prevent pension liberation with greater control over the registration and de-registration of pension schemes. The changes will begin to take effect from 20 March 2014. (Finance Bill 2014) (5)

    2.59 Individual Protection – The government will introduce individual protection 2014 (IP14) as a consequence of the reduction in the lifetime allowance to £1.25 million from 6 April 2014. Individuals with IP14 will have a lifetime allowance of the value of their pension savings on
    5 April 2014 subject to an overall maximum of £1.5 million. (Finance Bill 2014)

    2.60 Dependants’ pension scheme – The government will consult on options to simplify the Dependants’ pension scheme rules to ensure the rules apply fairly, and reduce administrative burdens. Any legislative changes will be in a future Finance Bill.

    2.61 Pensions tax: abolish the age 75 rule – The government will explore with interested parties whether those tax rules that prevent individuals aged 75 and over from claiming tax relief on their pension contributions should be amended or abolished.

    2.62 Voluntary National Insurance contributions (VNICs) Class 3a – The Budget confirms further details about the new class of VNICs, which will enable those who reach State Pension age before the 6 April 2016 to top up their Additional State Pension record. The scheme will be open from October 2015 for 18 months. The pricing will be set at an actuarially fair rate and the maximum additional amount available will be £25 a week. The Department for Work and Pensions (DWP) will set out full details shortly. (11)

    2.63 Qualifying non-UK pension schemes (QNUPS) – The government will consult on ways to give equivalent treatment to QNUPS and to UK registered pension schemes to remove opportunities to avoid Inheritance Tax (IHT). (Finance Bill 2015) 

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Page 70 Red Book.

Welfare

2.98 Welfare cap – Budget 2014 caps welfare spending in scope for the years 2015-16 to 2018-19 at the level of the OBR forecast. The forecast margin will be 2% of the underlying cap in each year that the cap applies. More information regarding the welfare cap can be found in Chapter 1 and Annex A.

2.99 Migrants’ access to benefits – Budget 2014 scores the impacts of measures to manage migrants’ access to benefits announced by the government since November 2013. (46)

2.100 Carer’s Allowance income disregard – Budget announces that the government will increase the earnings limit in Carer’s Allowance to £102 per week from May 2014.

2.101 Support for Mortgage Interest (SMI) – Temporary measures to increase the support provided by the SMI scheme are extended for working-age claimants. The waiting period will remain at 13 weeks and the working-age capital limit will remain at £200,000 until 31 March 2016. (45)

2.102 Employment and Support Allowance – Budget 2014 confirms that a 7-day waiting period will apply to new claims for contributory and income-related Employment and Support Allowance from October 2014. (47)

2.103 Tax-Free Childcare – Budget 2014 confirms that the Tax-Free Childcare costs cap, against which eligible parents can claim 20% support, will be increased to £10,000 per year for each child. This will mean that eligible parents can now benefit from greater support, worth
up to £2,000 per child from autumn 2015. Tax-Free Childcare will be rolled out to all eligible families with children under 12 within the first year of the scheme’s operation. (43) 

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Page 79 Red book

  1. 2.180 VAT: zero rate for adapted motor vehicles for wheelchair users – The government will consult on reform of the VAT zero rate relief on the supply of motor vehicles adapted for the use of wheelchair users, to seek to better target the relief and reduce fraud, and to ensure that users of lower limb prosthetics can benefit from the relief. 

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