Osborne Budget 2010

Emergency Budget - 22 June 2010

by Ashley Clark, Director

Chancellor George Osborne got to his feet at 12.32pm to deliver the first and promised Conservative/Lib Dem coalition government Emergency Budget - the "unavoidable" budget as he called it.  A summary of the main points are as follows:

Personal Tax

- Personal 'Tax Free' Allowances will increased by £1,000 to £7,475 on 6 April 2011

- Higher Rate Tax threshold will not increase and will be frozen meaning more people will pay higher rate taxes

- Capital Gains Tax remains at 18% for Basic Rate Tax payers.  For Higher Rate Tax payers capital gains tax will increase to 28% from midnight tonight.

- Capital Gains Tax for Entrepreneurs when selling businesses at 10% will be extended from £2m to a £5m lifetime allowance

- VAT will increase from 17.5% to 20% on 4 January 2011 meaning goods will be more expensive.  Zero VAT rated items like children's clothes and magazines will still be exempt.

- Duty on cigarettes, alcohol and fuel remain unchanged although the Labour proposed increase to duty on cider will is withdrawn 

- Furnished Holiday Lettings Tax Legislation will be reintroduced - this allowing people to run their holiday homes as true businesses - good for reducing your personal tax bill as well as increasing local authority income 

- Landline Tax abolished

- Council Tax Rates are to be frozen for one year meaning local authorities will have to tighten their belts

- Pension Tax Relief will be revisited

Corporation Tax & National Insurance

- Small Companies rate will be reduced by 1% to 20% from April 2011

- Main Rate will be reduced from 28% to 27% April and successively each year by 1% until it reaches 24% to encourage large companies to the UK

- Employers National Insurance starting threshold will be increased by £21 per week pay from £110 to £131 per week from April 2011

- New Business start up outside London with 10 or less employees will benefit from a National Insurance exemption  for early years in business

- Tax incentives for the video games industry is to be scrapped

- Banking levy will be charged to all larger banks levied on their 'Balance Sheet' effectively a wealth tax on the capital value of each bank

Public Sector Pay

- Pay freeze for two years for all those earning over £21,000 although those below will receive a flat rate £250 increase each year.

- New rule that executives can earn no more than 20 times the lowest paid workers

- Armed forces will receive a boost by doubling the 'operational allowance' for those on active service

- A full review of Public Sector Pensions will be conducted by "Labour" peer Lord Hutton to avoid political bias and ensure an impartial review

 State Pensions & Benefits

- State pension will increase in line with inflation, earnings or 2.5% whichever is the higher.

- State pension age increases up to age 66 and past that to 67 and 68 will be "accelerated"

- Child Benefit (family allowance) will be frozen for three years

- Tax Credits will not be available to those with a combined household income of £40,000 or more, reducing from the current level of £50,000 although the Child Element of Tax credits will increase by £150

- Housing Benefit will have ceilings set at a maximum of £250 per week for a 2 bedroom property and £400 per week for a 4 or more bedroom property means that people cannot have huge homes funded by the state when they do not work

- Disability Living Allowance is to be reviewed with a new medical assessment for all existing and new claimants with effect 2013