Pre-Budget Report

by admin on January 11th, 2010

The key points at a glance

The key points at a glance from Chancellor Alistair Darling’s third Pre-Budget Report.

Economy

UK economy expected to contract by 4.75 per cent this year, with a return to growth in the fourth quarter.

Forecasts UK will grow 1-1.5 per cent next year and by 3.5 per cent in 2011/12.

Inflation to rise from 1.5 per cent to around 3 per cent early next year before falling back.

Public finances

Provisions for potential impact from bank bail-outs on taxpayer revised down from £50bn to around £10bn.

Borrowing to hit £178bn this year and £176bn next year, higher than Budget forecasts.

As share of GDP, borrowing to be 12.6 per cent this year, 12 per cent next year, then 9.1 per cent, 7.1 per cent, 5.5 per cent in 2013/14 and 4.4 per cent in 2014/15.

Net debt forecast to reach 56 per cent of GDP this year, 65 per cent next year and 78 per cent by 2014/15.

UK deficit to be halved over four years.

Tax

VAT will return to 17.5 per cent on 1 January as planned, with no other changes in VAT.

Bingo Duty to be cut from 22 per cent to 20 per cent for next year’s Budget.

In April 2012, point at which people start paying 40 per cent income tax to be frozen for one year, hitting those earning more than £43,875.

National Insurance Contributions

All employer, employee and self-employed rates of National Insurance to rise by a further 0.5 per cent from April 2011. This is in addition to the 0.5 per cent increase already announced in March 2009, so the actual increase will be 1 per cent.

Starting point from which National Insurance is payable to be raised, so that no-one earning less than £20,000 will pay any more in contributions.

Pensions

Basic state pension will rise by 2.5 per cent in April, a real-terms increase of nearly 4 per cent – with effect from 2010/11.

Employer pension contributions to be included in definition of tax income relating to pensions tax relief for those earning over £130,000 – with effect from 2011/12.

Public sector

Senior civil service pay bill to be cut by up to £100m over three years.

Any new government appointment over £150,000 and all bonuses over £50,000 to require Treasury approval.

All public sector pay settlements capped at 1 per cent for two years from 2011, while recognising the special circumstances of the armed forces.

State contributions to public service pensions for teachers, councils, NHS and the civil service to be capped by 2012, saving £1bn a year.

Inheritance tax

Individual Inheritance Tax allowance
to be frozen at £325,000 for the next year.

Banks

No windfall tax on banks.

Bonuses above £25,000 will subject to a 50 per cent one-off tax. This tax will be payable by the bank and (a) it only applies to the amount of any bonus that exceeds £25,000, and (b), in addition to being subject to National Insurance Contributions, as a higher rate taxpayer the individual receiving the bonus will be taxed on the whole bonus at 40 per cent/50 per cent.

Business

Enterprise Finance Guarantee scheme for bank loans to small businesses to be extended for a further 12 months, guaranteeing a further £500m of loans.

10 per cent Corporation Tax rate to be introduced on income that arises from patents in the UK.

Strategic Investment Fund to support hi-tech projects given £200m boost.

The Time To Pay scheme, allowing firms to spread tax payments, will be extended for as long as needed.

Empty property relief threshold to be extended so that 70 per cent of all empty properties will be exempt.

Increase in Corporation Tax for smaller companies to be deferred, leaving the 2010 tax rate unchanged.

Benefits

Benefits linked to inflation, such as Child Benefit, will rise by 1.5 per cent in April.

Support for Mortgage Interest Scheme will be extended for further six months.

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