Budget highlights at a glance
Chancellor Alistair Darling has delivered his Budget report - his last before the general election.
* Darling says the "right course was made" to help the UK out of the recession.
* He adds the task is to bring down borrowing while at the same time helping people and businesses. The government plans to halve the deficit within the next four years.
* 50% tax on bankers' bonuses - announced in the pre-Budget report - has raised £2 billion, twice as much as forecast.
* ISA allowance will increase annually in-line with inflation.
* Fuel duty will rise by 1p instead of 3p this April - with another 1p rise in October.
* 0% stamp duty threshold will increase to £250,000 (from £125,000) for first-time buyers from midnight tonight (24 March) for this year. This will be paid for by a rise in stamp duty to 5% for properties over £1 million.
* Darling confirms plans to improve financial inclusion by ensuring everyone has access to a basic bank account. Around 1.75 million people currently don't have a bank account.
* The inheritance tax threshold has been frozen for a further four years to help fund long-term care.
* Child tax credit will increase by £4 a week for one and two years olds from 2012. Winter fuel payment will be guaranteed for another year for nine million pensioner households.
* The main rate of capital gains tax will remain at 18% - however, for entrepeneurs, the lower 10% threshold will increase to £2 million.
* "Cider has been undertaxed" - therefore duty will increase by 10% above inflation on Sunday.Tobacco duty will rise by 1% above inflation and duty on beer, wine and spirits will rise by 2% from midnight.
* The national minimum wage will rise. From 1 October 2010, workers aged 21 and over will see the minimum wage increase by 2.2% from £5.80 to £5.93; workers aged between 18 and 20 will receive a 1.9% increase from £4.83 to £4.92; and 16 to 17 year olds will benefit from a 2% increase from £3.64 to £3.57.
* At the heart of the Budget will be a £2.5 billion one-off growth package for businesses, paid for by switching spending and the proceeds from tax on bank bonuses.
* Over the next year, RBS and Lloyds will have to fund £94 billion in new business loans, more than 50% of which will be for small and medium businesses.
* £100 million to improve local roads and £185 million for motorways.
* Darling confirmed predicted economic growth of 1% to 1.5% in 2010.
* The borrowing forecast has been cut by £11 billion. Borrowing will be £167 billion this year, £163 billion in 2010/11 and £131 billion in 2011/12. National debt forecast will fall from 56% to 54% of GDP in 2009/10.
* Immediate cuts to spending would be "wrong and dangerous", Darling warns.The government will stick to its spending plans next year. However, he confirms £11 billion cost-efficiency savings.
* Extend support for young people out of work until March 2012 - it was originally meant to end in March 2011. This guarantee means "no one under 24 will be unemployed for longer than six months without offer of work or training," he says.
* £270 million to help universities create more places for students in 2010/11.
* Darling points out that the unemployment claimant count is lower than the one Labour inherited in 1997 - despite the recession.
* Housing benefit needs to be reformed - from October next year, the most expensive properties will be excluded from this calculation in each area, saving nearly £250 million each year.
* Bailing out the banks was the right decision, he adds. "We intend to get all taxpayers' money back."
* "We need long-term reform to prevent excessive risk taking [by banks]," Darling says. This involves ensuring banks are well capitalised but also curbing renumeration.
* International 'tax on the banks' must be brought forward quickly. "There can be no return to business as usual for banks."
* Tory policies would "suffocate" recovery.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Child tax credit
A scheme started in 2003 that sought to replace a raft of other tax credits and benefits, the payout depends on the number of dependant children in a family, and its level of income. The amount of credit is reduced as income increases. It is payable to the main carer of a child, usually the mother, and is available whether or not the recipient is working.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.