Chancellor George Osborne stood up to make his annual Budget speech in the Houses of Parliament . His budget was what he called fiscally neutral – which means the government isn’t planning to give anything away – tax breaks – or take anything either- such as tax hikes.
He said could do this is because he expects the UK’s recession to ease over the next few years, in fact the UK economy should grow (rather than contract) by 0.8% this year and by 2.7% by 2014.
And while unemployment will peak this year it is predicted fall over the next five years with an estimated 1 million more jobs being created.
Inflation, which makes things more expensive and erodes savings will fall from 2.8% to 1.9% by the end of next year.All these predictions come courtesy of the Office for Budget Responsibility, an independent auditor of HM Treasury.
He’s also going to use the sale of the Royal Mail, which is due to be privitised, to help pay of Britain’s debts (although it’s worth noting the Royal Mail pension fund which is in serious debt will be subbed by the taxpayer in order to expedite the sale).
So what are the main points of the Budget 2012
- Full child benefit threshold will now be £50,000 a year, after which is is staggered which means households with £60k or more will not get it.
- Personal tax allowance – an individual will need to earn over £9,205 a year before they start paying tax.
- First time buyers will get help to get on the property ladder – although The Great Britain Building Fund and the National Loan Guarantee Scheme to loan money to small businesses.
- Green energy also got a boost, with more incentives for developers to build wind farms. Medicine and aerospace also got a mention.
- State retirement age to be reviewed. It’s likely to go up even more.
- Top rate of tax to be reduced from 50p in the £1 to 45 pence – for those earning over £100k a year.
- VAT is also going be reviewed – for example we pay VAT on sports drinks but not food.
- Pensioners will also benefit from a simplified tax system, different rates used to apply at 65 and then 75,now it’s going to be one level from 65.
- Cigarettes are going up by 37p a pack from 6pm this evening.
- The basic state pension is to go up by £5.30 a week.
- More action on property tax avoidance including making wealthy homeowners pay stamp duty even if they have put their property into a corporate envelope
Other things he announced included: a fund for faster broadband, reduction of red tape for small businesses plus government funding and a relaxation on Sunday trading laws during the Olympics this summer.
50% tax rate can only be justified if it raises significant sums,
If you are into saving tax you might want to read this exclusive story on the website FTAdviser (part of the Financial Times) about ISAs by our editor Samantha Downes