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Budget 2016: The key points from George Osborne's speech

The Chancellor delivered his Budget to the House of Commons on Wednesday.

ITV News political editor Robert Peston reports:

Here are the key policies and major announcements from George Osborne's speech:

  • Lifetime ISA

A new "lifetime ISA" will be introduced for people under 40.

From April 2017, people aged 18 to 40 can save up to £4,000 each year until they are 50.

Mr Osborne said that for every £4 people save, the Government will give them £1 - a bonus of up to £1,000 a year.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.

  • Sugar tax

A new sugar levy on the soft drinks industry will be introduced, the Chancellor said.

It will be introduced in two years' time and there will be two bands – one for total sugar content above five grams per 100ml, and a second, higher band for the most sugary drinks with more than eight grams per 100ml.

Pure fruit juices and milk-based drinks will be excluded from the tax.

  • Double the dedicated funding for sport in primary schools

Money raised by the sugar tax will be used to double the primary PE and sport premium (the additional money schools have to spend on PE and sports) to £320 million a year.

A sugar tax will be introduced in two years time. Credit: PA
  • A longer school day for 25% of secondary schools

25% of secondary schools will be able to opt in to a longer school day from September 2017 so that they can offer a wider range of activities for pupils. There will be up to £285 million a year to pay for this.

  • Every school will be an academy by 2022

By the end of 2020, every school in England will be an academy or free school – or be in the process of becoming one.

This will give head teachers more control over their budget and the curriculum they teach.

The current system for funding schools will also be replaced by a fairer national funding formula from April 2017.

There will be £20 million a year in additional money for schools in the North and a look at making maths compulsory to the age of 18.

  • Tax-free personal allowance raised to £11,500

The tax-free personal allowance is being raised to £11,500 with the Chancellor declaring 31 million people will be paying less tax and 1.3m of the lowest paid taken out of tax altogether.

We already knew it would rise to £11,000 in two weeks' time, and the new allowance will be introduced from April next year.

"It means a typical basic rate taxpayer will be paying over £1,000 less income tax than five years ago," Mr Osborne said.

The higher rate tax threshold is being raised. Credit: PA
  • 40% tax threshold increases

From next April, the higher rate threshold will be increased from £42,385 to £45,000.

"That’s a tax cut of over £400 a year," Mr Osborne said. "It is going to lift over half a million people who should never have been paying the higher rate out of that higher tax band altogether."

  • Capital Gains Tax to be cut to 20%

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.

Capital Gains Tax is a tax on the gain you make when you sell something that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay. Capital Gains Tax on residential properties does not apply to your main home, only to additional homes.

  • Alcohol duties to be frozen

Duties on beer, cider, whisky and other spirits will be frozen.

All other alcohol duties will rise by inflation.

  • Fuel duty frozen for sixth year

Fuel duty will be frozen for the sixth year in a row, Mr Osborne said.

He said it would result in a saving of £75 a year for the average driver.

Fuel duty will be frozen again. Credit: PA
  • Insurance Premium Tax increase to fund flood defences

The standard rate of Insurance Premium Tax will be increased by half a percent.

The extra money raised - £700 million - will be spent on flood defences.

  • New tax allowances for money earned from the sharing economy

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one for income from property you own.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway, loft storage or a room on Airbnb – will be tax free.

  • Corporation tax cut

The rate of corporation tax will be reduced to 17% by April 2020, Mr Osborne said.

It was 28% at the start of the last parliament and 20% at the start of the current session, he said.

The rate of corporation tax will be reduced to 17%, Mr Osborne said. Credit: PA
  • Small business rate relief increase

The Chancellor announced he was "more than doubling" the small business rate relief.

He said he was raising the threshold from £6,000 to £15,000 and from £18,000 to £51,000 for the higher rate.

George Osborne said 600,000 small businesses would pay no business rates at all from next year as a result, saving them £6,000.

  • Britain on course for budget surplus

Britain is on course for a budget surplus by the end of this parliament, Mr Osborne told the Commons.

He said: "Because we have acted decisively, in 2019-20 Britain is set to have a surplus of £10.4 billion.

"The surplus is then set to rise to £11.0 billion the year after. That’s 0.5% of GDP in both years."

  • Growth forecasts revised down

Growth forecasts have been downgraded, the Chancellor said.

It was 2.4% for 2016, but has now been revised down to 2% by the OBR, Mr Osborne said.

It is predicted to be 2.2% in 2017 rather than 2.4%, and 2.1% in each of the three years after that.

  • Brexit warning

Mr Osborne said the Office for Budget Responsibility had warned that "there appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty".

He used his Budget speech to argue that Britain will be "safer, stronger and more secure" if voters choose to remain in the EU in June's referendum.

The Chancellor warned of the dangers of a 'Brexit'. Credit: PA
  • Spending cuts

There will be a further £3.5 billion of cuts to Government spending by 2019/20.

This was "a little less" than he was expected to make, ITV Economics Editor Richard Edgar said.

  • Debt reduction target missed

Mr Osborne confirmed he has failed to meet the rule of debt falling as a proportion of GDP this year.

  • Transport

HS3 between Leeds and Manchester - £60 million has been announced to develop plans to cut journey times to around 30 minutes between Leeds and Manchester, as well as improving transport connections between other cities in the north.

£80 million to give Crossrail 2 the go-ahead - This will be used to continue planning for Crossrail 2. The proposed Crossrail 2 route will connect South-West and North-East London, increase tube capacity and reduce the pressure on Victoria and Waterloo stations.

  • Veterans will be able to keep payments from war pensions rather than using this to pay for social care

From April 2017, 4,000 Armed Forces veterans will be able to keep payments from their war pensions if they need social care.

  • More funding to protect homes and businesses from flooding

Funding for new defences including in Leeds, York, Calder Valley and Cumbria and for maintenance of existing defences.

This will be paid for by Insurance Premium Tax, a tax on insurers. The standard rate will rise from 9.5% to 10%.

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