Budget 2015: Corporation tax down, minimum wages up
In his seventh Budget speech, and second in four months, George Osborne has proposed further cuts to corporation tax and a large rise in minimum pay rates.
The chancellor told MPs that corporation tax will be cut to 19% in 2017 and 18% in 2020.
He used the end of his speech to reveal the introduction of a new ‘national living wage’ for people over 25, starting at £7.20 an hour from April 2016. That is 70p higher than the minimum wage now, or 50p above the rate that will come in in October.
The government says it wants the Low Pay Commission to ensure that the NLW reaches 60% of median earnings by 2020. That would take it to more than £9.
The Treasury says that 2.7m people will receive a pay rise as a direct result, with others likely to receive increases as they look to maintain the difference between their wages and the NLW.
It says the cost to business of NLW will be equivalent to 1% of corporate profits by 2020. The Office for Budget responsibility says the NLW will cost 60,000 jobs by 2021, but that overall employment is due to be higher by then by 1.1million anyway.
In other announcements, the personal allowance, at which people start paying tax, will rise to £11,000 next year and the 40p rate will come in at £43,000.
The dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income, with rates of dividend tax to be set at 7.5%, 32.5% and 38.1%.
A new apprenticeship levy will be introduced for large employers and fuel duty rates will be frozen.