In his first budget, the Chancellor, George Osborne, today unveiled a wide range of spending cuts and tax rises aimed at fixing Britain’s deficit within the next five years.
The main headlines in what the Chancellor called a “progressive and “unavoidable budget include a rise in VAT from 17.5 per cent to 20 per cent from 4th January 2011 – a measure that is projected to raise over £13billion a year of extra revenues – and substantial changes to welfare benefits and tax credits.
Here are the key points at a glance:
- VAT will rise to 20 per cent from 17.5 per cent from 4th January 2011
- Capital gains tax (CGT) for higher-rate taxpayers will increase from 18 per cent to 28 per cent from midnight tonight
- CGT will remain at 18 per cent for basic-rate taxpayers and the annual exemption amount will remain unchanged at £10,100
- Corporation tax will be cut from 28 per cent to 27 per cent next year and then by 1 per cent a year for the following three years to 24 per cent
- Personal income tax allowance will increase by £1,000 in April next year to £7,475. This means about 23 million basic-rate taxpayers will benefit by up to £170 a year, while 880,000 will pay no income tax at all
- Child benefit to be frozen for three years from April 2011
- Child element of the child tax credit to increase by £150 above inflation next year
- Tax credits reduced for families earning more than £40,000
- Maximum limits on housing benefits from April 2011
- No new tax increase on alcohol, fuel or tobacco
- Basic state pension linked to earnings from April 2011
- Two-year public sector pay freeze on staff earning more than £21,000
- Bank levy to be introduced in January next year – this is projected to bring in over £2billion of annual revenue once established
- The standard rate of Insurance Premium Tax will rise from 5 per cent to 6 per cent from 4th January 2011
Landlords may feel a sense of relief as, although Capital Gains Tax is being increased for higher-rate taxpayers, the changes weren't as severe as many were predicting.