Chancellor George Osborne began his third Budget speech with a pledge to support working families, through ‘far-reaching reform’ of the UK tax system.
Asserting that Britain will avoid a ‘technical recession’ and will ‘earn its way in the world’, the Chancellor announced that the UK’s economic growth forecasts remain broadly unchanged from the Autumn Statement, with the growth forecast for 2012 revised upwards slightly to 0.8%.
The Chancellor’s statement contained some key announcements on personal and business taxation, including confirmation of a cut in the 50p headline rate of income tax. Confirming recent speculation, the Chancellor emphasised that the rate has ‘damaged competitiveness’ and raised ‘next to nothing’, although the reduction of the rate to 45p will not take effect until April 2013.
Meanwhile, personal tax allowances were also a significant focus of the Chancellor’s speech. With the income tax personal allowance set to rise to £8,105 next month, the Chancellor confirmed that a further rise in the income tax allowance will take place in 2013, taking the allowance to £9,205. Age-related tax allowances currently stand at £10,500 for those aged up to 74 and £10,660 thereafter. However, these allowances are to be frozen, and will stop for anyone turning 65 after 5 April 2013.
Among the key measures of significance for business was a doubling of the planned reduction in the headline rate of corporation tax, which will see the rate fall from 26% to 24% in April 2012. Individuals and partnerships in business whose turnover is up to £77,000, are also set to benefit from ‘radical reform’ of the tax administration system.
The tax cuts announced are to be funded by a clampdown on tax avoidance, together with the introduction of a new 7% Stamp Duty Land Tax on residential properties worth over £2 million, and a provision charging a 15% duty on certain high value purchases. A new cap will also be applied to previously uncapped tax reliefs, set at a rate of 25% of total income (or £50,000 if greater) for those claiming relief of more than £50,000 a year.
Controversial plans to withdraw Child Benefit for higher rate taxpayers have also been modified, with the Chancellor announcing that the benefit will be clawed back by 1% for every £100 of earnings in excess of £50,000 a year, with only those earning over £60,000 losing the benefit entirely.
Despite recent campaigns, the Chancellor stated that there would be no change to the Government’s plans for fuel duty, meaning that the scheduled 3p rise will take place in August. The price of tobacco, meanwhile, will see an increase of 5% above inflation.
Additional measures announced include the introduction of tax credits for the video games, animation and high-end television production sectors, a new annual statement of Government spending for taxpayers, and a temporary relaxation of Sunday trading laws, to cover eight weekends during the Olympics and Paralympics.