March 2011 UK Chancellors Budget
The amount people can earn before paying tax will be increased by around £600 from April next year, Chancellor George Osborne will announce today.
Chancellor George Osborne is to increase the personal income tax allowance to give 25 million people a cut of around £45 a year in Wednesday’s Chancellors Budget.
The Budget will also include a £250m package designed to help 10,000 first-time buyers to purchase a newly built flat or house. The buyer would have to put up 5% of the cost, while the government and home builder would both put up 10%.
The Chancellor will also announce plans to lift 250,000 low earners out of paying income tax and pledge that no one earning less than £42,000 will be pushed into the higher tax band before 2015.
A flat-rate state pension of £140 could be confirmed in the Budget, ending means-testing and signalling a significant victory for Iain Duncan Smith, the Secretary of State for Work and Pensions.
Enterprise Investment Schemes
The rules are likely to be loosened to make it easier for seed investors to back small companies by improving income tax and capital gains tax relief.
Capital Gains Tax
CGT principle private residence relief, intended to stop you having to pay a hefty CGT bill when you sell your home, is seen as too complex and ripe for simplification.
Axing the 50p income tax rate would be politically impossible now, but business groups are hoping for a signal that the long-term plan is to ditch the top rate. They shouldn’t hold their breath, though the Chancellor is expected to reiterate that it is only temporary.
Pay and pensions
Public sector workers on more than £21,000 have had their pay frozen for two years and are being asked to increase their pension contributions. The Hutton Report on public sector pensions recommended further reforms, such as moving from a final salary to a career average pension scheme, but they are unlikely to be introduced in this Chancellors Budget.
Expect the Office for Budget Responsibility to downgrade its growth forecasts for this year from 2.1% to about 1.6%.
The Chancellor will probably beat his borrowing forecast in 2010/11 of £148bn by about £5bn, allowing him a little room for generosity.
Of great political interest will be the so-called “Learjet tax”, but a more important review of the status and liabilities of non-doms may also be launched.
The government may increase further the amount individuals can earn before paying any income tax. Having pushed it from £6,475 to £7,475 he may raise it again to £8,000, but this time without “clawing back” the benefit from people further up the income scale.
Merging Tax and National Insurance
An impossible task in one Budget or even 10, but another review with the aim of merging them is likely to be welcomed.