“This is not a tax-raising Budget, nor can we afford a give-away” is what the Chancellor of the Exchequer, George Osborne said when introducing the UK Budget for 2011 this afternoon. As expected the Government are doing their best not to spend money that they don’t have but keep to their stated aims: A strong and stable economy; Growth and Fairness.
The State of the Economy
The Chancellor started of blaming the last Government for the state of economy and following last years emergency budget said he would set out plans for economic stability and growth. However he said we don’t need any more spending cuts and that he already has a credible plan to tackle the deficit, so the government doesn’t need to ask the tax payer for more and the Budget will be fiscally neutral.
1.7% GDP growth is forecast for this year which is down from the previous forecast of 2.1% with inflation between 4% and 5% although the target is 2%. Borrowing is still in line with Government targets to sharply lower the deficit by the end of the Parliament, and in fact the targets may be reached a year early.
Personal Taxation
Personal tax allowances will rise again, by £630 to £8,105 in April 2012That’s on top of the £1,000 increase this April which takes the allowance to the first £7,475 of a taxpayer’s income, before they start paying tax. This will benefit those in the 40% tax bracket as well, only those earning over £115,000 won’t see a saving.
It’s worth remembering that the deal for stitching together a coalition Government commits the Chancellor to giving a personal tax free allowance of £10,000 by the end of this Parliament so there will be even bigger tax breaks due for low earners in the next budget.
The Government will consult to combine Income tax and National Insurance a single tax to simplify taxation, this will take a number of years to achieve. There will be also be a change with tax allowances linked to the Consumer Prices Index from April 2012. Previously tax allowances were linked to the Retail Price Index which measure inflation at a higher rate so the change results in a slow down of tax allowances in the future.
Revenues from 50p tax rate will be assessed, as well as revenue from high value properties where the Chancellor says tax avoidance is rife and needs reform.
Those most affected will as normal be smokers and drinkers who will see prices increase for the cost of their indulgences.
Business Taxation & Reforms
From April this year Corporation tax will be reduced by 2% (a 1% rate decrease each year to reach 23% was already on the cards). Bank Levy rates will be adjusted so that the banks won’t benefit from the cut in Corporation tax. The aim is to have the lowest Corporation tax in the G7.
George Osborne announced a moratorium protecting new business and all business employing less than 10 employees will be exempt from domestic legislation changes for the next three years.
The business rate relief holiday for small businesses will be extended by a year to October 2012. A further 43 tax reliefs will be scrapped as part of simplification of tax code.
There will be new rules to require planners to prioritise growth and jobs, the aim is introduce a powerful new presumption in favour of sustainable development, so that the default is ‘yes’ along with streamlining the system for planning applications.
Focus on Growth
The Entrepreneurs Relief scheme doubles to £10m from April 6 and Small companies’ research and development tax credits rise to 200% from April and 225% in 2012. There will also be a new 5.75pc rate on overseas financing income to boost the UK’s attractiveness as a place for businesses to invest. The Chancellor want the world to know that the UK is “open for business”.
There will be £100m funding for science facilities and 21 “Enterprise Zones” to be created in England, backed by tax incentives. The government will fund an additional 80,000 work experience places for young people, ensuring up to 100,000 places will be available over the next two years as well as up to 50,000 additional apprenticeship places over the next four years. They will also expand the University Technical Colleges programme to establish at least 24 new colleges
Fuel Duty
Fuel duty will be cut by 1p per litre from tonight, but in truth with prices for diesel already around £1.40 a litre that’s not going to make a lot of difference to most people. However the inflation linked increase in fuel duty of 5p which was due to come in next week, is delayed until 2012.
On top of that the fuel duty escalator which adds 1p above inflation each year is suspended for the duration of this Parliament. You might not notice the difference in your pocket but the delay is effectively a cut as it was already scheduled.
There will also be £100m set aside for repairing potholes in England and £200m support for regional railways in England.
Air Passenger Duty will be frozen for a year, but for those with private jets who avoid paying this tax the Government will look to charge them. The Chancellor said it’s not fair that the very rich can avoid taxes which the poorer have to pay.
Conclusion
Whilst there may not be any huge savings for most people and businesses in this budget there aren’t too many people that will be upset. Along with help in housing, protection for pensions, modest public sector pay increases and inheritance tax relief for charitable giving the biggest difference most people will see is when the rise in personal tax allowances kick in.
24 Responses
There does not seem to be a further cut in the small businesses corporation tax. Is that right?
cheeky sod 300.000 quid plus a crack for a cruise missile plonked on ghaddafi and his crew, and just a miserable 1p off petrol
Good news for UK based eBay sellers of items currently being delivered from the Channel Islands by the big brands with a drop in LVCR to £15 from £18 and with a clear indication that it will be gone by 2012. Good stuff.
the feul duty plan made laugh..
1p off the pump price
paid for by 2bn tax on oil companies.
the oil companies will put the price of oil up to cover the tax
and the price of petrol will go up!
Either someone is stupid or they think we are.
inheritance tax!
Just who do the government think they are?…and we let them get away with taxes like that!
How many times can th esame £ be taxed
I always have reservations about the predictions made in Budget Speaches. Inevitably they are wrong. If you go back over the years and look at the predictions and then look at what actually happened the actuals are almost always totally differant from the predictions. Remember the old saying:- If you get 10 Economists debating a subject you get Eleven differant opinions. Many years ago when I was a Student there was 4 of us sharing a Flat. One was a Student Economist. The only person who ever shared the flat who could never manage his money was the economist. He was always in debt and never knew where his money had gone. I remember one year I was working on the Budgets in the Company. My boss(the Company Secretary-the second biggest idiot I ever worked for) suggested contacting the parent company and asking their central Economist Department for the Companies “Official” Inflation Rate for the following year(Because we had to build the inflation rate into our Budget Proposals). I spoke to the “Expert” in the Economists Department(Who earned a great deal more than I did) only to learn that the Economists did not have any idea about the following years inflation rate. In fact he asked me my view on it and when I suggested a figure his answer was that as it sounded reasonable that I should use that rate. Basically Economists are mainly clowns with as much idea about the economy as the weathermen have about what tomorrows weather will be and the Politicians who believe them are even bigger clowns.
For any US readers, Chris is pleased that diesel prices may not rise above the current $8.60 per US gallon.
Anyone know if the VAT registration threshold went up in the budget?
While I welcome the Business Rates holiday being extended by a further 12 months it does seem daft to do this after Business Rate bills for 2011/12 have already been received and so there will be the expense of sending out revised bills. The same thing happened when the holiday was first introduced.
For those with time the budget document is here https://cdn.hm-treasury.gov.uk/2011budget_complete.pdf
Just listenen to Ed Balls on bbc1 re budget response. What a load of balls he talks. I think he forgets that Labour woukd have cost us 61 billion in interest next year with their borrowing.
They should have suspended the NI employer contribution of 11% for a year or so, that would help.