Emergency Budget 2010

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 4^th 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.