June 24, 2010Emergency Budget: the highlights

All the key points from the chancellor’s emergency Budget speech

• Calling it an “unavoidable Budget”, George Osborne says Budget details will not be buried in the book.

• Everyone will have to contribute to the recovery, but everyone will also share in the eventual prosperity.

• Estimated growth in the UK economy should hit 1.2% this year, 2.3% next year, 2.8% in 2012, 2.9% in 2013 and 2.7% in both 2014 and 2015.

• CPI rates will be 2.7% at the end of the year before returning to target “in the medium term”, which remains at 2%.

• The UK’s borrowing will fall to 1.1% of GDP within five years.

• Public sector net debt to fall to 67% of GDP by 2015/2016, compared to increases proposed by the previous government.

• Unemployment to peak at 8.1% this year before falling back to 6.15 by 2015.

• Most of the deficit reduction will come from spending cuts. 77% of the reduction will come from savings, while 23% will come from tax rises.

• George Osborne says the structural deficit will be plugged by 2015/16 and is set to be cleared one year early.

• The Civil list will be subject to the same audit by the National Audit Office and will be frozen at £7.9m annually.

• An extra £17bn in savings in public services has been found, equivalent to a 25% across the board cut. Final details will be in the spending review released on 20 October.

• Public sector pay will be frozen for two years, but the 1.7m people earning up to £21,000 will receive a pay rise of £250 a year.

• The small companies rate will be cut to 20%.

• Housing Benefit to be reduced by £1.8bn by the end of Parliament.

• Corporation tax will fall to 24% by 2014, dropping 1% a year.

• Tax relief for the video games industry has been repealed.

• Plans to increase broadband access across the country will be funded by the private sector and not through a broadband levy

• The threshold for employers National Insurance Contributions will be increased.

• Employers outside of London and the South East will be exempt from National Insurance Contributions for the first £5,000 up to ten employees.

• About £2bn will be raised via a new banking levy charged to large banks.

• The standard rate of VAT will rise to 20% from 17.5% on 4 January 2011, bringing in £13bn a year of extra revenue.

• The increase in cider duty will be reversed at the end of the month

• Duties on alcohol, tobacco and petrol will remain the same.

• There will be a review of oil prices in time for the next Budget aimed at stabilising pump prices. A further announcement on aviation tax by the next Budget is also expected to change a tax structure which charges each passenger to a per flight tax.

• Personal tax allowance to rise to £7,475 in April, making 23 million taxpayers an extra £170 a year better off and taking nearly a million people out of income tax.

• Capital Gains Tax stays at 18% for standard rate taxpayers but from midnight, those paying the higher rate will see CGT rise to 28%

• The chancellor has announced that while the CGT rate for entrepreneurs’ relief will remain at 10%, the limit is to increase from £2m to £5m.

• Capital allowances are cut to mitigate more a generous corporation tax regime.

• Allowances for plant and machinery operations are reduced from 20%-18% and from 10%-8% for longer lived assets.

• Pensions will be re-linked to earnings, the state pension will increase in line with the consumer price index or 2.5% whichever is greater.

Story from:

Accountancy Age