Key Points From Yesterday’s Pre-Election Budget

Please see below our quick summary of the main points announced in yesterday’s budget, which was clearly highly politically motivated, withholding detail of most of the forthcoming cuts until after the election:

• More tax agreements like the Liechtenstein agreement, to crack down on  tax  avoidance and evasion. The first three being with Dominica, Belize and  Grenada. This  is expected to raise £500m
• Those over 60 yrs can work less hours and remain eligible to receive Working Tax Credit, which they will also make easier to claim. They also announced ”considering” scrapping the compulsory retirement age
• Child tax credit will by £4/week for 1 & 2 year olds from 2012 and more free childcare places for pre-schoolers
• 440,000 families have already benefited from tax credits, by £38 more a week
• Inheritance tax threshold will be frozen at the current level (£325K) for the next 4 years
• Basic bank accounts will be accessible to everyone which means an extra 1m people will have access to bank accounts.
• ISA limits raised from £7,200 to £10,200 and each year thereafter in line with inflation
• Cuts to housing benefit paid to those in more expensive properties
• Reforms made to cut pensions bill
• Increased winter fuel payments for pensioners’ will continue into 2011.
• Stamp duty scrapped on properties up to £250,000, for first time buyers, through to 2011. This will be funded be an increase in stamp duty to 5% for properties >£1m.
• The Chancellor announced that borrowing is now lower than forecast last year and is now forecast to be 11.1% of GDP in 2010/11 and then 8.5% of GDP in 2011/12.
• He announced the deficit is £11bn lower than forecast in 09/10 and the government remain committed to halving the deficit within four years.
• Growth predicted at 1-1.5% for this year, but he reduced his growth forecast for 2011 to 3-3.5%, aligning it closer to City forecasts.
• Debt is projected to be £100b lower by ‘13/’14 than that predicted in last year’s budget.
• Bankers’ bonus tax raised £2b in 2009/10
• The Chancellor announced some detail of £11bn efficiency savings, including relocating 15,000 civil servants from London over the next 5 years.
• £5bn cuts in lower spending priorities
• Introduction of a one-off £2.5b growth package to help small businesses, especially investing in key skills
• Guaranteed job or training opportunity for all 18-24 yr olds who have been out of work for 6+ months, until March 2012
• Lloyds & RBS have apparently lent £38b to SME’s and will now be providing £94b in new business loans, at least 50% of which will go to SME’s
• £200m announced for a new ‘growth capital fund’ to help fast growth companies
• Corporation tax rates for small companies maintained at 21%, deferring an earlier intention to raise. Main rate also remains unchanged at 28%
• Annual investment allowance for small business doubled to £100K
• New ‘UK Finance for Growth’ setup to oversee the government’s £4bn support for businesses
• 15% increase in the number of government contracts awarded to SME’s
• Business rates cut from October, for a year, resulting in tax reductions for 500,000 small companies
• VAT registration threshold increased to £70K, from April 2010
• Tax incentives for the British computer games industry
• New green investment bank, controlling £2bn of equity, focused on greener, cleaner energy and transport. The initial focus will be on wind turbines investment
• No change to main capital gains tax rate, but Entrepreneurs’ lifetime relief for capital gains tax doubled to £2m.
• No announcements were made regarding VAT, income tax or National Insurance
• The 3p increase in fuel duty will now be staged, increasing by 1p in April ’10, Oct ’10 and Jan ‘11
• Duty on cider increased by 10% over inflation and Duty on wine, spirits and beer rising rise by 2% (all from Sunday midnight).
• Tobacco duty will rise by 1% over inflation immediately, then +2% every year until 2014.
• £285m additional funding for motorway improvements and expansion projects and £100m extra for local road repairs