So, the Chancellor of the Exchequer George Osbourne has delivered his second Budget since the election of the coalition government last year.
Whilst addressing MPs, My Osbourne said that he did not intend to raise taxes, or increase spending cuts.
“This is not a tax-raising budget, nor can we afford a giveaway,” he told MPs as he started his speech.
Despite Mr Osbourne saying this, plenty of interesting changes and proposals were announced.
No Major Tax Changes
Following advice from the Office of Tax Simplification, the government has decided that instead of increasing taxes, they will attempt to simplify them. As signaled beforehand, the government will now consult on merging the national insurance system with that of the income tax system.
Mr Osbourne did mention, however, that it will take several years to conduct the necessary consultation and complete whatever changes are eventually agreed.
Corporation Tax Cut
The Chancellor wants to tell the whole world, particularly parts of it that have lots of money to invest, that the UK is “open for business”. So, instead of the 1% reduction in Corporation Tax announced last budget, from April this year, it will be reduced by 2%. But, furthermore, it will continue to be reduced by 1% per year over the next three years to reach 23%.
Banks, on the other hand, will see their levies rise to compensate for this.
The lowest paid will benefit, with a further increase in the size of the personal allowance, increasing next year (April 2012) by £630 up to £8,105.
That is on top of the increase this April of £1,000 which takes the personal allowance to the first £7,475 of a taxpayer’s income.
Tobacco duty will rise by 2% above inflation, whilst alcohol duty will remain the same.
Vehicle excise duty will rise in line with inflation, but for heavy good vehicles, it will be frozen.
One of the most wanted elements of the budget, fuel duty, will be cut by 1p, effective from tonight at 6pm. As well as this, the planned inflation-linked increase, scheduled for next week, is delayed until 2012.
The fuel duty “escalator”, that automatically adds 1p to fuel duty on top of inflation each year, is now cancelled for the duration of this Parliament.
The annual charge introduced by the previous Labour Government on non-domiciled taxpayers will go up from £30,000 for those here for seven years to £50,000 for those in the UK for 12 years.
It is estimated that this will provide an extra £200 million to the Treasury.
Home Owners, and First-Time Buyers
The Government announced plans to try and help first-time buyers to obtain a mortgage. It’s proposed shared-equity scheme will be aimed at helping 10,000 families buy a home for the first time. The cost of doing this – put at £250m – will be financed by some of the proceeds from the bank levy.
At the same time, one of the existing help schemes for existing homeowners in financial difficulty will be extended.
The Support for Mortgage Interest scheme will last an extra year, until January 2013, which Mr Osbourne said would cut the mortgage arrears of 100,000 homeowners who have become unemployed.
The Government is going to set about planning a new “single-tier” state pension system, offering a weekly pension of £140 per week.
This will not affect current pensioners; only new ones who have not retired by the time the changes come into force.
The Government is also going to devise a way in which the state pension age rises automatically in line with increase in longevity.
There will also be a formal consultation on implementing the proposals of Lord Hutton for public service pension schemes.
The two main recommendations were that the scheme should be converted from final-salary plans to ones where the pension is based on a member’s average earnings over their career.
The normal pension age of the schemes will rise as well, in line with forthcoming increases in the state pension age.
From April 2012, people who leave 10% or more of their estate to charity will receive a 10% reduction in their inheritance tax bill. The government estimates this will bring in an extra £300 million for charities.
What are your thoughts? Do you think George Osbourne was right to say that this is a 'Budget for growth', or do you think he was being too optimistic? Leave a comment below; we'd love to hear from you!