George Osborne, the Chancellor has delivered his first budget speech….The Emergency Budget.
He started his speech be letting us all know that the government had “inherited the largest budget deficit of any economy other than Ireland” and said “I'm not going to hide hard choices from the British public or bury them in the small print”
He stated that [the budget] “deals decisively with our debts”. He also comments that “it is tough but it is also fair” with 77% of the total debt consolidation coming from spending reductions and 23% through tax increases.
The key areas of note are:
o The basic personal allowances will be increased to £7,475 in April 2011.
o The Chancellor says that this will lift 880,000 people out of income tax altogether
o Main Rate of Corporation Tax cut to 24% over the next four years
o Small companies rate of Corporation Tax cut to 20% from April 2011
o Annual Investment allowance reduced to £25,000 per year. The previous government increased these to £100,000 per year.
o Rise in the standard rate of VAT to 20% from January 4th
o All other exemptions (food etc kept the same)
o Reduced rate of VAT held at 5%
o The standard rate of Insurance Premium Tax (IPT) will increase to 6% at the same time.
Capital gains tax CCGT)
o The rate of CGT will be increased to 28% from midnight today for higher rate tax payers.
o The 10% rate of CGT has been extended to the first £5m of lifetime gains for business assets.
Furnished Holiday Lettings (FHL)
o The FHL tax rules have been re-instated
o There will be a three-year scheme to exempt new businesses (in targeted regions) from up to £5,000 of employers National Insurance Contributions
o This is likely to apply for each of their first 10 employees hired in their first year of business
o This scheme should be running by September
Some other points of interest are:
• Tax credits reduced for those earning more than £40,000 per year
• Child element of the child tax credit increased by £150
• Health in pregnancy grants abolished from April 2011
• Child benefits frozen for 3 years
• Threshold at which employers pay National Insurance contributions will rise by £21 a week (above inflation)
• The government will aim to help local authorities implement a council tax freeze for 2011/2011
• A Bank Levy will be imposed from January 2011. France and Germany have also committed to a levy.
• The planned Broadband duty will be abolished before it was even introduced!
• No rise in Duty on alcohol, tobacco or fuel. The planned increase in Cider duty abolished.
As expected the Chancellor announced a varied number of tax increases and spending cuts. VAT and CGT increases came as no shock nor did the increase in the basic personal allowance (the Lib Dems had argued hard for this).
This summary was written immediately following the delivery of the budget. It is meant as a guide to the key budget announcements only and professional advice should be sought before any decision is made as a result of reading these notes.
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