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Budget Basics – The Budget 2012: Changes That Will Affect You

Wednesday, March 21st, 2012

So …. After all the speculation and hype, George Osborne has finally revealed all. The draw down of Afghan operations has given the Chancellor a £2.4bn bonus.

Tax
Income Tax
  • Personal allowance will rise by an extra £1,100 in April 2013 in addition to the increase to £8,105 already scheduled for this April.
  • This means you’ll be able to earn £9,205 before you pay any tax.
  • The 50% ‘high earner’ tax rate will be lowered to 45% from April 2013.
National Insurance
  • The plan to merge Income Tax & National Insurance is still likely to go ahead.
Tax for pensioners
  • The age-related additional personal allowance will be phased out to leave a single personal allowance that applies to all.
  • This will be rolled out from April 2013 and, according to Osborne, no one receiving a pension will lose out because of it.
VAT
  • Loopholes in the VAT system will be closed to reduce tax avoidance.
  • The current VAT exemptions on food, children’s clothes, books and newspapers will not be affected.
Tax statements
  • Personal tax statements will be sent to all taxpayers.
  • These will set out your average tax rate for the year, how much tax and NI you’ve paid in total and how this has funded both public spending and public debt.
Corporation tax
  • Corporation tax will be cut by 1% today in addition to the 1% reduction scheduled for April – together this will take the UK rate of corporation tax to 24%.
  • Two further cuts are scheduled for next year so by 2014 UK corporation tax will be reduced to 22%.
  • To ensure these cuts don’t benefit the banks the bank levy rate will be increased to 0.105% next January.
Other tax
  • Capital gains tax on residential properties owned by companies will be introduced.
  • A cap on tax relief for high earners will be introduced in April 2013. This means anyone that claims upwards of £50,000 in tax relief will be limited to receive a maximum of 25% of their income.
  • A general tax avoidance rule will be introduced to tackle tax evasion, details of which will be set out next year.
Benefits
Child benefit
  • The child benefit cut for higher rate tax payers will stay but changes have been made.
  • Those earning less than £50,000 will get to keep child benefit.
  • Those earning more than £50,000 will have their child benefit payments reduced by 1% for every £100 they earn over the £50k threshold.
  • Those earning more than £60,000 will not receive child benefit payments.
Housing
Affordable housing
  • The Get Britain Building scheme that extends funding to companies that build new houses will be upgraded to encourage affordable property development.
Stamp duty
  • Individual-owned residential properties worth over £2 million will be liable for 7% stamp duty.
  • The stamp duty rate will increase to 15% for residential properties that are bought by a company.
  • The government will investigate retrospective stamp duty charges for residential properties already owned by companies.
Armed forces
  • An extra £100 million will be used to improve accommodation for those in the armed forces.
  • Members of the armed forces serving overseas will also benefit from 100% council tax relief.
  • This will be funded by a £2.4 billion saving on the cost of operations in Afghanistan.
Planning permission
  • Next week the government will publish an overhaul of planning regulations that should make applications for planning permission far simpler.
Alcohol & Tobacco
Alcohol
  • There will be no change to taxation on alcohol.
Tobacco
  • Duty on all tobacco products will rise by 5% above inflation at 6pm tonight.
  • This will increase the cost of an ‘average’ pack of cigarettes by 37p.
Transport
Fuel
  • There will be no additional changes to fuel duty.
  • The Fair Fuel Stabiliser will still apply so fuel duty will go down when the cost of fuel rises and increase when fuel prices fall.
Road tax
  • Vehicle Excise Duty will increase by inflation only.
Trains
  • Rail links to the North of England will be improved.
  • The London underground and train network will be extended.
Flights
  • Additional airports may be built in the South East of England.
Employment & Education
Employment
  • Local authorities will be given the flexibility to introduce local pay rates for civil servants whose pay freezes end this year.
  • This is to bring public sector pay in line with wages available in the private sector.
  • There will be investment in manufacturing with the aim of doubling UK exports.
  • New Enterprise Zones will be introduced in Scotland, Wales and Ireland.
Education
  • A scheme that extends Enterprise Loans to young people to start and grow their own businesses will be piloted later this year.
Pensions
State pension
  • A single rate, contribution-based pension that pays a minimum of £140 will be introduced for future pensioners in the next Parliament.
  • Plans for an automatic review of the state pension age will be published this summer.
Entertainment
Sunday trading
  • Sunday trading laws will be relaxed for eight consecutive Sundays from 22nd July to coincide with the Olympics.
Broadband
  • Ultrafast broadband will be rolled out in 10 of the UK’s biggest cities.
  • A number of smaller cities will also benefit from ultrafast broadband speeds.
  • Improvements will be made to broadband connection speeds in rural areas.
Entertainment industry
  • UK companies that produce video games, animation or high end TV programmes will be eligible for tax relief.
  • A new gambling duty on games machines will be introduced.