Very Impressive budget delivered by George Osborne. The highlights are as follows.
· Compulsory annuity purchase to be abolished! – not mentioned by GO. · Entrepreneurs relief up to £5million per person · Avoided the huge CGT rises to 50% as predicted, raised to 28% for higher rate tax payers but maintain current personal allowance. · Promised to revisit the limits on Higher Rate tax relief for those earning above £130,000. · Increased personal allowance against Income Tax by £1000 and target £10,000. No benefit to higher rate tax payers. · VAT rises to 20%. · Bank levy to generate £2bill per annum by the end of this parliament · Reduction to employer NI for new businesses set up out with London · Tax credits reduced for those earning above £40,000 Full details below. Future Finances
· Structural budget should be balanced within 5 years.
· Debt to fall as a % of GDP by 2015/16. i.e. current account surplus by the end of the current parliament.
· UK growth 2010 - 1.2%, 2011 - 3.2%,2012 - 2.9%, 2013 - 2.7%, 2014 - 2.7%
· CPI 2.7, 2010 back to 2% in the medium term
· Unemployment rate to peak in 2010 at 8.1 to reach 6.1 in 2015.
Actions in the Budget.
· EURO preparations unit abolished.
· £30 Bill of public expenditure reductions.
· Capital spending not to be reduced.
· Sale of Student Loan book, sale of NATS1, Sale of TOTE, seek capital investment into Royal Mail.
· Civil list - frozen at £7.9 million per annum.
Government Department Spending.
· Average real cut of 25% over 4 years. Target to focus cuts in welfare.
· All will be resolved in the spending review and publicised on 20th October.
Public Sector
· 2 year pay freeze, excluding those earning under £21,00 pa. Those under will get £250 per annum rises.
· Armed forces, operational allowance doubled.
· new limit of 20x the lowest paid for the highest paid.
· Public sector pensions - John Hutton to review, interim report in September 2010, full report pre budget 2011.
· Planned increase of state pension age to 66 to be accelerated.
Welfare
· From 2011, benefits increased in line with CPI not RPI. Save £6bill per annum by end of parliament.
· Tax Credits - no more benefits from families earning over £40,000. Range of criteria amended and reduced.
· Single parents, expected to return to work when their youngest start school.
· Child Benefit - frozen for next 3 years.
· Housing benefit to be reformed as currently some can claim over £100k. Maximum limits will be introduced.
Companies
· Employers NI threshold to increase
· Corporation tax to be cut from 28% to 24% over the next 4 years
· Small company rate cut to 21%
· No tax reliefs for video game industry
· Banking sector – January 2011, a bank levy against their balance sheets. Expected to generate £2bill per annum. French and Germans reflect this new tax.
· Annual Investment Allowance limit reduced to £25,000
Regions
· White paper on how to rebalancing the economy away from London.
· Upgrade Manchester Metro and other inner city transport links.
· Any new business set up out with London, will be exempted from employers NI for the first 10 employees
VAT
· January 4th 2011 increased up to 20%
· By the end of the parliament will generate £13 Bill per annum .
· Food children’s clothing etc will continue to be exempt.
Duties
· No new increases on alcohol, tobacco and fuel.
· Reverse plan to increase cider duty.
Council Tax
· To be frozen
Capital Gains Tax
· CGT to increase to 28% for higher rate tax payers.
· CGT not affected for basic and lower rate tax payers
· Entrepreneurs relief increased for the first £5 million
· No taper relief introduced.
Pension Tax Relief
· Work with industry to change the rules but raise £3bill as per the previous governments plans
Income Tax
· Personal Income Tax threshold increased by £1000 to £7450 by April 2011.
Basic state pensions
· Pension increases re attached to National Average Earnings rates from 2011.
Child tax credit
· Child element to increase by £150 above inflation.
