The Chancellor of the Exchequer, George Osborne, will deliver his first Budget to Parliament at 12.30pm today.
We will be updating this blog throughout the day with live coverage and analysis as it happens.
10:52 – The BBC is speculating that the income tax threshold will be increased by £1,000. This means that the first £7,475 of income will be free of income tax. However, this is likely to be clawed back for higher earners.
As things stand, for every £2 over £100,000 of earnings, your personal allowance is reduced by £1. This threshold could be lowered to £80,000 or even lower to compensate for the higher personal allowance for lower earners.
12:41 – George Osborne (GO) sets the scene for the Budget, calling it ‘the unavoidable budget’. He explains that the Office for Budget Responsibility has been established to remove politics from setting growth forecasts.
The structural deficit will be in balance one year earlier than planned, which makes this a five year Budget.
12:44 – GO restates the 80/20 principle, saying that 80% of deficit reduction should come from spending cuts with only 20% from higher taxes. He says that in reality it will be 77% from spending cuts and 23% from tax increases.
12:54 – A public sector pay freeze for the next two years, although lowest paid public servants protected with a £250 flat rate pay rise in each of the next two years. Dealing with the cost of public service pensions is met by appointing John Hutton to carry out an investigation. He will provide an interim report in September this year to inform decisions made in spending review.
12:57 – Coalition Government will accelerate increase of State Pension Age from 65 to 66 and consult on abolishing the default retirement age.
Benefits, apart from State Pension, will be uprated in future by Consumer Prices Index (CPI) rather than Retail Prices Index (RPI).
13:00 – Big decision on Child Benefit, after considering various options, freezing level of Child Benefit for the next three years.
Introducing a medical assessment for Disability Living Allowance from 2013, for existing and new claimants.
13:04 – Making it cheaper for companies to employ people, from April 2011 employer NI threshold will rise by £21 a week over indexation. This lifts 650,000 employees out of this tax altogether.
Corporation tax – cut by 1% to 27p in the pound, followed by 1% cuts taking it down to 24% in subsequent years, making UK economy more competitive and attractive to businesses. Also reducing the small companies corporation tax rate to 20% from April 2011.
13:09 – Banking tax – banks to make a more appropriate contribution to reflect risks they represent to economy and taxpayer. Taking the initiative by introducing a bank levy from January 2011 applied to balance sheets. This will not apply to smaller banks. Expect this levy to generate over £2bn a year in annual revenues.
13:12 – GO abolishes ‘broadband tax’ on landline telephones before it is established.
13:14 – Some incentives for new businesses set up from today outside of London and the South East, with up to £5,000 of relief on employer NI payments for the first ten employees.
13:16 – VAT goes up, as widely predicted, from 17.5% to 20% from 4th January 2011. All zero-rated items remain exempt from VAT for the course of this parliament. Insurance premium tax standard rate goes up from 5% to 6%.
No new increases on duties for alcohol, tobacco or fuel.
13:18 – Council tax will be frozen for one year from next April, to drive in value for money within all areas of government.
13:19 – Capital gains tax remains at 18% for basic rate taxpayers and goes up to 28% for higher rate taxpayers, with annual exemption remaining at £10,100. Entrepreneurs relief extended from £1m to £5m of qualifying gains. No taper relief or indexation allowance introduced due to complexity involved.
13:21 – GO will work with industry on alternative ways to raise similar amount of money from pension tax relief changes being introduced next year, possibly reducing the annual allowance instead.
13:22 – Income tax personal allowance being increased by £1,000 from 6th April 2011, as predicted. Higher rate taxpayers will not benefit from this change, with higher rate income tax thresholds remaining frozen until 2013/14. Aim remains to increase income tax personal allowance to £10,000 by end of parliament.
13:24 – Lasting help for pensioners being provided by relinking the basic state pension to earnings from April 2011. Also being protected by ‘triple lock’ guaranteeing annual rise in state pension by earnings, prices or 2.5%, whichever is greater.
13:27 – Child element of child tax credit will be increased by £150 over inflation next year.
