The Budget 2010 Key Points

5 07 2010

Economy

  • Growth is forecast to be 1.2% this year, taking into account the budget measures. It is forecast to be 2.3% next year, 2.8% in 2012, 2.9% in 2013 and 2.7% in both 2014 and 2015.
  • Debt will be falling, and structural current deficit should be balanced by 2014.
  • Unemployment rate forecast to peak at 8.1% this year, and then fall for each of the next four years to reach 6.1% in 2015
  • 77% of total consolidation to be achieved through spending reductions, and 23% through tax increases.
  • Public sector net borrowing will be £149bn this year, £116bn next year, £89bn in 2012-13, £37bn in 2014-15, falling to £20bn in 2015-16.
  • Additional current expenditure reductions of £30bn a year by 2014-15.

Public Sector

  • People earning less than £21,000 will each receive a flat pay rise worth £250 in each of the two years.
  • Operational allowance for troops in Afghanistan doubled to £4,800.
  • Will Hutton will draw up plane for fairer pay across the public sector, without increasing the overall pay bill, so that those at the top of the organisation are paid no more than 20 times the salaries of those at the bottom.
  • An independent commission chaired by John Hutton will review public sector pensions. There will also be consultation on scrapping default retirement age.
  • Rise in the state pension age to 66 will be accelerated.
  • Government will seek private capital injection into the Royal Mail Group

Welfare

  • Child benefit to be frozen for the next three years
  • Caps on housing benefits to be introduced – from £280 a week for a one-bedroom property to £400 a week for a four-bedroom or larger. Together with other measures, this will reduce the costs of housing benefit by £1.8bn a year by the end of parliament.
  • Sure start maternity grant will go to the first child only.
  • Eligibility for child tax credits to be reduced for families with a household income of more than £40,000 from April 2011.
  • The baby element of the child tax credit will be abolished from April next year.
  • Child element of the child tax credit to increase by £150 above indexation next year.

Taxes

  • Corporation Tax, currently 28%, to fall by 1p in the pound a year for four consecutive years until it reaches 24%.
  • New firms outside south-east/east to be let off employer nation insurance contributions, up to £5,000, for each of the first 10 employees recruited.
  • Government to work with local authorities to freeze council tax for one year from April next year.
  • Capital Gains Tax, currently 18%, to increase for higher earners to 28% from midnight. Low and middle-income savers will continue to pay 18%.
  • Higher rate income tax threshold frozen until 2013.
  • The standard rate of insurance premium tax to rise from 5% to 6% and the higher rate to increase from 17.5% to 20%.
  • 50p-a-month levy on phone lines to pay for the rollout of superfast broadband scrapped.
  • Planned tax relief for video games industry to be scrapped.

Banking and Savings

  • Bank levy to be introduced in January next year, to apply to the balance sheets of UK banks and building societies, and to the UK operations of banks from abroad. Expected to raise over £2bn of annual revenues.

Drinks, cigarettes and fuel

  • No increase in duties.
  • Reversal of government decision to increase duties on cider by 10% above inflation confirmed.

Pensions

  • From April next year the basic state pension will be re-linked with earnings.
  • Basic state pension will increase every year by highest of earnings, inflation or 2.5%.

Businesses

  • Regional Growth Fund to provide finance for regional capital projects over the next two years.
  • The 10% Capital Gains Tax rate for entrepreneurs, which currently applies to the first £2m of qualifying gains made over a lifetime, will be extended to the first £5m of lifetime gains.
  • Capital allowances for the majority of plant and machinery assets to fall from 20% to 18%, while the allowance for longer-lived assets will fall from 10% to 8% from April 2012.

Contact Us, or Get a free Quote, to see how we can help you deal with these changes. Tax Accountant.

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