An overview of the key points of Chancellor George Osbourne’s Budget yesterday.
Armed Forces
It was announced that the cost of operations in Afghanistan was £2.4 billion less than first expected. The money saved will see an additional £100 million used to improve military accommodation.
Families welfare grants were doubled and personnel who are serving overseas will receive 100% relief on an average council tax bill.
Borrowing
Borrowing for this year is expect to be £126 billion which is £1 billion less than first thought. Borrowing is also predicted to be £120bn for 2012-13 and £98bn for 2013-14. Borrowing has also been forecast to fall to £21 billion by 2016-17.
Business Taxes
From April corporation tax will be cut to 24% with the figure dropping to 22% in 2014.
There will also be a consultation on simplifying the tax system for small firms with a turnover of up to £77,000. The government will also provide support for £150m of tax increment financing to help councils promote development.
Child Benefits
Child benefits will receive an incremental decrease in the amount paid when someone in the household has an income greater than £50,000. For each £100 earned over the £50,000 threshold an additional 1% will be reduced until the income earned reaches £60,000 when the benefit will cease completely.
Economy
The Independent Office for Budget Responsibility (OBR) has revised the UK’s growth forecast for 2012 to 0.8%, up from the expected 0.7%. The growth forecast for 2013 is 2%, 2014 2.7%. 2015 and 2016 have both been forecast at 3%.
The Eurozone growth forecast for this year has been revised from 0.5% to 0.3%, a drop of 0.2%. UK inflation is also forecast to drop from 2.8% this year to 1.9% next year.
Energy
There is to be a “major package of tax changes” aimed at boosting oil and gas extraction along the North Sea. There will also be a £3 billion new field allowance west of Shetland.
Fuel, Cigarettes, Alcohol & Gambling
There will be no changes to existing fuel duty plans. The planned 3.02p per litre rise on the 1st of August will still go ahead.
Vehicle excise duty is to rise by inflation but will be frozen for road hauliers.
Tobacco products will see a 5% above inflation increase from 18.00 GMT on the day of the budget which is the equivalent of 37p on a packet of cigarettes.
There is to be no change on existing alcohol duty plans so duty will rise 2% above the rate of inflation. This will see the price of a pint increase by more than 5p.
A new duty on gaming machines will be introduced at a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings.
There will be a shift in gambling tax from where the company is based to where the customer is with the aim of discouraging firms from relocating abroad.
Green Measures
The Government will seek to make ”major savings” in the administrative cost of the Carbon Reduction Commitment. If such savings cannot be found then the Government will bring forward an alternative environment tax this autumn.
Housing
There will be a new stamp duty of 7% on all homes worth more than £2 million from midnight on the day of the budget. This is has risen from 5%. The figure wil be 15% if the home is bought through a company.
Extra funding is to be made available to help construction firms who build new homes.
Income Tax
April 2012 will see the 50p top rate of tax reduced to 45p.
Personal income tax allowance will rise to £9,205 from April 2013. The Government say this will mean 24 million people will be around £220 better off. In real terms, the change amounts to £170 more a year for a basic rate taxpayer.
The higher rate tax bracket (40%) will see around 300,000 more people br drawn in as the threshold is lowered to £41,450 from £42,475. This will largely offset the benefit of the personal allowance rise for higher rate earners who will get £42.50 more a year.
Jobs
The OBR expects there to be 1 million more jobs created in the economy over a 5 year period. The unemployment rate is expected to peak at 8.7% this year and then fall to 6.3% by 2016-17.
Other Help for Businesses
Bank levy will be increased to 0.105% from January 2013 “to ensure that corporation tax cuts do not benefit the banks”. The levy will raise £2.5bn a year.
There will be a new cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year, but no significant change to pensions relief.
A personal tax statement will be sent to 20 million taxpayers from 2014. The statement will detail an individual’s income tax and National Insurance payments and how those contribute to public spending.
New general anti-tax avoidance rule to be introduced.
Consultation on integrating income tax with National Insurance.
Pensioners
Pensioners will no longer have a higher level of personal income tax allowance than people of a working age. Currently a pensioner over 65 can earn £10,500 before payin income tax and £10,660 if they are over 75. This will be removed from 2013.
The allowance for those already of pension age will be frozen until the rest of the poulation catches up.
Public Sector
The Government will be publishing evidence in relation to the case for regional public sector pay. There will also be an option for government departments to move to regional pay structures for civil servants when current freeze ends.
Transport & Infrastructure
Rail lines between Manchester and Sheffield, Manchester and Blackpool and Manchester and Preston will all see improvements. The summer will see the release of a report concerning the future of aviation in south-east England.
The UK’s 10 largest cities will receive funding for superfast broadband and wi-fi.
VAT
“Loopholes and anomalies” to be removed – including removing exemptions for sports nutrition drinks and hot takeaway products in supermarkets. Self-storage, static caravans and hairdressers’ chairs will also no longer be exempt.
Existing VAT exemptions will remain for food, children’s clothes, books and newspapers.
Welfare
George Osborne said that if reductions in departmental spending continue as they have, further savings of £10bn will be needed by 2016.
Treasury officials say it is “very early days”, and the chancellor’s remarks simply “set out the scale of the challenge”.
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