George Osborne has laid out the financial road map for the next year, announcing tax hikes and cuts on everything from mansions to millionaires.
But what do you need to know? Here are the key points of the coalition government’s 2012 Budget:
- Income tax: 50p tax rate for anyone earning more than £150,000 a year will be reduced to 45p, effective from April 2013. George Osborne said the rate had damaged "Britain’s competitiveness" and that “no Chancellor can justify a tax rate that damaged the economy and raised next to nothing".
HMRC calculates the 50p tax rate raised £1bn – a third of estimates when brought in by Labour.
- Personal allowance: Threshold for tax-free earnings will rise to £9,205 from April 2013 – up £1,100 on the current allowance. This will put £220 a year into the pockets of millions of Britons.
- Corporation tax: George Osborne announced corporation tax will be cut by 1% immediately, taking the tax to 24%. This will decrease to 22% by April 2014. The Chancellor said that this is the “biggest sustained reduction in a generation” and that the move will be "an advertisement” for business in Britain.
- Stamp duty: The Chancellor said that avoidance of stamp duty is a “major source of abuse” and in turn announced that Stamp Duty Land Tax charge on residential properties over £2m will rise to 7% from midnight and such homes bought inside a corporate envelope will see tax of 15%.
- Tobacco: The Chancellor announced tax on cigarettes will rise to 5% above inflation - adding 37p to the price of each packet sold from 6pm tonight.
- Gambling: Osborne said that slot and fruit machines would see new taxes – with a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings.
- Alcohol and Fuel: No immediate changes to taxation announced. But Previously announced plans mean the price of a pint will still rise between 5p and 10p from next week.
- Additional: Osborne said that the government were “pressing forward” with plans to integrate operation of income tax and national insurance – a consultation on that will be published in April.
- Where your money goes: Osborne confirmed that everyone would receive a personal tax statement explaining what they have paid and where this money has been spent – ie how much of your money has gone to things like education, health, benefits and the like.
- Tax breaks for industry: The 2012 Budget contained tax breaks and support for several UK based industries, including TV production companies, animators, video games producers and more industrial sectors like aviation and pharmaceuticals.
[Related link: Full coverage of the UK Budget 2012]
- Child benefits: The Chancellor confirmed that 90% of all families will remain eligible for child benefits as the cutoff threshold will activate when someone in the household is earning more than £60,000. These benefits will gradually decrease 1% for every extra £100 earned over £50,000.
- Pensions: There will be a single tier pension for future pensioners, set above the means test at an approximate £140 a week. Osborne said that this change would not cost more than the current systems and it would be based on contributions.
State of the UK economy
- The Office of Budget Responsibility [OBR] expects UK economy to avoid recession as the outlook is “broadly unchanged” since last November’s report.
- The OBR is revising up the growth forecast from 0.1% to 0.8 % this year, then to 2% in 2013, 2.7% in 2014 and 3% in 2015/16.
[Related article: Budget 2012- what it means for you]
Deficit and borrowing
- Osborne confirmed that the deficit is falling from the 11% level it was at when the coalition government came into power and is forecast to reach 7.6% in 2013.
Borrowing this year is to amount to £126bn, a billion less than Osborne forecast in the Autumn statement. This figure is forecasted at £120bn in 2013 (unchanged) and £98bn 2013-14.