Budget 2012: At a glance
Chancellor George Osborne outlined details of his "kaleidoscope" Budget on Wednesday. Find out what was cut, what will be spent and how it affects you in our round-up....
In his opening comments, Osborne said the Budget backs business and rewards work and rewards aspiration. "There is no other road to recovery," he said.
He also reaffirmed "unwavering commitment to work with record debt".
"Britain is going to earn its way in the world. It unashamedly backs business."
In his initial remarks about tax, he promised: "We want a tax system that is more competitive than any other country in the world."
Osborne said he would deliver a "strategy where financial services are strong but not the only backbone to the economy."
He cited key risks to economy as UK exports to eurozone and high oil prices.
- Office of Budget Responsibility (OBR) expects the British economy to avoid a technical recession.
- Inflation expected to fall to 1.9% next year.
- The British economy has carried “more momentum” than previously anticipated. They forecast 2% next year, 2.7% in 2014, 3% in 2015/ 2016.
- Gold holdings have risen to £11 billion.
The UK deficit
- Deficit expected to fall – state was borrowing 1 in 4 of every pound it spends.
- Deficit is falling and forecast to reach 7.6% this year.
- On course for debt to be falling by 2016/17.
- Government is borrowing at cheapest prices than at any time in 400 years.
- Borrowing this year is to come in at £126 billion.
- OBR forecasts unemployment to peak this year at 8.7% before falling each year to 6.3% by 2016-17.
- One million new jobs will be created in the next 5 years.
- Got to help young adults - providing 'record' number of apprenticeships.
- Exploring idea of enterprise loans for young people to start own businesses.
- 50p tax rate: highest in G20. Reduced to 45p from April 2013.
- Tax-free allowance band rises to £9,205 in April 2013, making 24 million people £220 a year better off.
- From next month corporation tax will fall to 24%, in 2014 it will be 22% - biggest reduction of the “generation”.
- New cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year, but no significant change to pensions relief.
- Age-related allowances for pensioners to be simplified over time, starting in April 2013, creating a single personal allowance for all but ensuring no pensioner loses in cash terms.
- From 2014 taxpayers will receive personal statements, detailing what they have paid and where the money is going.
- The 50p tax rate has caused a “massive distortion” as £16 billion was deliberately shifted into the previous tax year. Lower tax rate: “An advertisement for jobs in Britain”.
- Self assessment receipts below forecasts by £3.6 billion.
- A general anti-evasion law to come into place.
- Modern and simpler tax system – esp for small firms.
- Integrate income tax and NI so businesses don’t run two different tax consultations.
- Remove loopholes, but no VAT remaining on food, drinks, childrens clothes, books.
- Simpler tax system for businesses to navigate.
- Simplified tax system for small firms with a turnover of up to £77,000.
- Mid-cap businesses fund increased by 20%.
- Enterprise finance guarantee to be expanded.
- Life sciences centre development and reduction in taxes on patents to make most attractive place to develop pharmas.
- Exports: want to double exports to £1 trillion this decade.
- Exports abroad must be accompanied by investment at home
- Britain has moved into the top 10 of the competitive places to do business. UK sold more to Ireland than Brazil, China, and Russia together.
- £70 million development fund to attract new businesses and new jobs.
- Tax credits for tv programming, games industry and animation.
- Enhanced capital allowances for businesses setting up in new Scottish enterprise zones in Dundee, Irvine and Nigg. A Welsh enterprise zone to be created in Deeside.
- Government support for £150 million of tax increment financing to help councils promote development and an extra £270 million for the Growing Places fund.
- New stamp duty of 7% on properties worth £2 million or more.
- Extra funding to help construction firms building new homes.
- Properties worth £2 million or more bought via a company will attract stamp duty of 15%, effective 21 March 2012.
- Above-inflation fule rises will only come into place if oil is $75 or higher.
- No changes on fuel.
- Vehicle excise frozen for hauliers.
- Tobacco duty: rise by 5% above inflation or 37p on a packet of cigarettes effective from 6pm 21 March.
- Alcohol duty: no further changes.
- Gambling duties: standard rate of 20%, with lower rate of 5% for smaller machines. Double taxation relief for gambling.
- £3 billion new field allowance in oil and gas in North Sea along with £3 billion new field allowance west of Shetland.
- Renewable energy will be crucial.
- Carbon reduction commitment - will seek major savings in costs borne by businesses or replace with different tax.
- Child benefit - only be withdrawn when someone in the household has more than £50,000 income, but will be withdrawn slowly – keeping some of their benefits.
- People with £60,000 or more in income will not receive any child benefit.
- Green investment bank to open next month.
- Bank levy to be increased to 0.105% from January 2013 "to ensure that corporation tax cuts do not benefit the banks". The levy will raise £2.5 billion a year.
- Automatic review of state pension age to ensure it keeps pace with increasing lifespans.
- Self-assessment forms for pensioners scrapped.
- New single-tier state pension for future pensioners to be set at about £140 and based on contributions.
- £5.30 increase in state pension.
Infrastructure and transport
- Must confront lack of airport infrastructure in South East - will set out thinking later in summer.
- £150 million financing for local councils to support development.
- Plans to work with mayor of London on plans to improve London transport, new £70 million fund to attract new investment and jobs.
- Enhanced capital allowances in Docklands.
- £1.2 billion to be invested in growth enhancing infrastructure in Manchester.
- Planning permission - overhaul of planning forms of 1000 pages to 50 pages - presumption in favour of development.
- UK will become “Europe’s technology centre” – starting with digital.
- £50 million will be made available for broadband in smaller cities. Plans to have 90% with access to super-speed broadband, funding ultra-fast in 10 UK cities.
- Government spending lower than expected in Afghanistan. The cost of operations is £2.4 billion lower over this parliament.
- Doubling rate of council tax relief for military families.
- There will be an extra £100 million to improve accommodation for the armed forces families.
- Information to be published on a case for regional public sector pay. Option for government departments to move to regional pay structures for civil servants when current freeze ends.
In conclusion, Osborne declared: "This country borrowed its way into trouble now we're going to earn our way out."
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
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.
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).