Key points of Chancellor George Osborne’s Budget on 21 March 2012
The key points of Chancellor George Osborne’s Budget on 21 March 2012:
From April 2013, the 50p top rate of tax will be cut to 45p.
Personal income tax allowance raised to £9,205 from April 2013 – a move the government says will make 24 million people £220 a year better off.
But 300,000 more people will be drawn into the higher rate – 40% – tax band from 2013/14 as the threshold is reduced from £42,475 to £41,450.
Pensioners will no longer receive a larger personal income tax allowance than people of working age.At present, the over 65s can earn £10,500 before tax, while those over 75 can earn 10,660, but those age-related allowances will removed for new pensioners from April 2013.
Allowances for those already of pension age will be frozen until the personal allowance for the rest of the population catches up.
George Osborne said “no pensioner will lose in cash terms”, but HM Revenue and Customs estimates that in 2013-14, 4.41 million people will be worse off in real terms, thanks to inflation, with an average loss of £83.
Within that total, 360,000 individuals aged 65 will lose an average of £285, while 230,000 people will be brought into income tax for the first time.
Automatic review of state pension age to ensure it keeps pace with increasing lifespans.
New single-tier state pension for future pensioners to be set at about £140 and based on contributions.
Will be reduced incrementally when someone in a household has an income of more than £50,000. It will fall by 1% for every £100 earned over £50,000. It will mean those affected will have to fill out self assessment tax forms.
Anyone earning more than £60,000 will lose the benefit completely.
Independent Office for Budget Responsibility (OBR) revises up UK growth forecast for 2012 to 0.8% – from 0.7%.
Forecast for 2013 is 2%, for 2014 is 2.7%, and in each of the two years after that 3%.
Eurozone growth forecast for this year revised down from 0.5% to -0.3%.
UK inflation forecast to fall from 2.8% this year to 1.9% next year.
Borrowing this year to be £126bn – £1bn less than forecast in the autumn. Predicted to be £120bn in 2012-13 and £98bn in 2013-14. Forecast to fall to £21bn by 2016-17.
Consultation to be held on offering gilts – government bonds – with maturity terms of more than 50 years to take advantage of current low interest rates.
JOBS AND SKILLS
OBR forecasts unemployment to peak this year at 8.7% before falling each year to 6.3% by 2016-17.
One million more jobs to be created in the economy over five years, OBR says.
From midnight on Budget day, new stamp duty level of 7% for homes worth more than £2m – up from 5%. Any such homes bought through companies will pay 15%.
Consultation on the introduction of “a large annual charge” on properties already held in so-called “corporate envelopes”. Treasury sources have suggested up to £140,000 a year on any worth more than £20m, down to £15,000 a year on those worth £2m-£5m.
Extra funding to help construction firms building new homes.
Corporation tax cut to 24% from next month. By 2014 it will fall to 22%.
Consultation on simplifying the tax system for small firms with a turnover of up to £77,000.
“Above-the-line” tax credit – a credit against a company’s corporation tax – from next year for firms conducting research and development.
Government support for £150m of tax increment financing to help councils promote development
OTHER HELP FOR BUSINESS
Relaxation of Sunday trading laws on eight Sundays during Olympics and Paralympics, starting July 22.
Enhanced capital allowances for businesses setting up in new Scottish enterprise zones in Dundee, Irvine and Nigg. A Welsh enterprise zone to be created in Deeside.
Enterprise finance guarantee, in which the government guarantees bank loans to small business, to be expanded.
Government considering enterprise loans for young people to start their own business.
Extra £270m for the Growing Places fund, which aims to boost local economic growth and job creation.
Cost of operations in Afghanistan to be £2.4bn less than expected.
Money saved will provide an extra £100m to improve military accommodation.
Personnel serving overseas will receive 100% relief on an average council tax bill.
Families welfare grant also doubled.
Government evidence to be published on the case for regional public sector pay.
Option for government departments to move to regional pay structures for civil servants when current freeze ends.
“Major package of tax changes” to boost oil and gas extraction in North Sea, along with £3bn new field allowance west of Shetland.
FUEL, CIGARETTES, ALCOHOL AND GAMBLING
No change to existing plans on fuel duty – a 3.02p per litre increase will go ahead on 1 August.
Vehicle excise duty to rise by inflation, but frozen for road hauliers.
Existing fair fuel stabiliser means above-inflation rises in fuel duty will return only if price of oil falls below £45 ($70) a barrel.
Duty on all tobacco products to rise by 5% above inflation from 1800 GMT on Budget day – the equivalent of 37p on a packet of cigarettes.
No change to existing plans on alcohol duty – meaning the duty will rise 2% above the rate of inflation, putting more than 5p on the price of a pint.
New duty on gaming machines at a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings.
Shift in gambling taxation – will be levied where the customer is based not the company. The aim is to discourage firms from relocation overseas.
TRANSPORT AND INFRASTRUCTURE
Network Rail to upgrade the Transpennine route between Manchester and Sheffield. Further improvements to the lines between Manchester and Preston, and Manchester and Blackpool.
Report on the future of aviation in south-east England to be published in the summer.
Funding for superfast broadband and wi-fi for the UK’s 10 largest cities.
“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.
OTHER TAXES AND ALLOWANCES
Bank levy to 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.
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.
Personal tax statement to be sent to 20 million taxpayers from 2014. It 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.
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”.
Government to seek “major savings” in the administrative cost of the Carbon Reduction Commitment, and bring forward an alternative environment tax this autumn if such savings cannot be found.