the Budget address on 21st March 2012.
George Osborne set out his budget to the house. As usual, the parts most relevant to the ordinary taxpayer were left to last, so who am I to change his order? This is what he said in the order he said it.
Bookkeeping fees are currently charged at the rate of £15 per hour.
on broadband . . .
"The UK is to become Europes technology centre," he said. 90% of the population should have access to superfast broadband. He announced funding for ultra fast broadband and wifi in 10 of the UK's key cities.
pensions . . .
There is to be a simplified flat rate state pension of £140 pw, for "those who have worked hard all their lives." This is to take affect from 2016, for those with a 30 year national insurance record.
More contentious, is what was inevitably dubbed the "granny tax". The over 65's currently get a tax free allowance of £10,500 up to the age of 74 and £10,660 after that. From 6th April 2013 however, these allowances will be frozen, and anyone turning 65 after that date will no longer qualify for the relief. Of course, if you are a pensioner with an income below these amounts, you will not be affected.
personal tax statements . . .
No surprises here, as this was leaked days ago. Every tax payer will receive a personal tax statement so that people will know how much tax they're paying and how that money is spent. (I'm not sure if everyone will be happy knowing how their money is spent).
corporation tax . . .
The rate for small businesses to be 20%. The Chancellor mostly dwelt on the large company rate - the headline rate - as he called it, which defines how friendly the UK is to business. The headline rate will be cut to 24% in April, with a further 1% cut in each of the following two years, bringing it down to 22% by 2014 - a headline rate that is "dramatically below our competitors."
tobacco and fuel . . .
A packet of cigarettes is to go up by 37p.
On the matter of fuel, the Chancellor prefaced what he was about to say, by reminding everyone that high oil prices are hurting UK businesses and consumers, and was quick to remind the House that he has already cut fuel duty by 6p below what was planned according to the fuel duty escalator.
The fuel duty escalator, as the Chancellor explained, was designed to force the cost of fuel at the pump to go up at a rate above the rate of inflation. Although not backing down from a further duty increase, he has for the first time broken the fuel duty escalator rule. Fuel duty will only go up by more than inflation, he said, if oil prices come down to £45 per bb (about $70). In the meantime, we can expect increases to be in line with inflation - I'm not sure whether he had CPI or RPI in mind. In any case, there will be a 3p per litre increase in duty in August.
tax avoidance . . .
"I regard agressive tax avoidance and tax evasion as morally repugnant," the Chancellor said. Now, there has been a lot of controversy over the loopholes that allow the rich to avoid stamp duty by buying residential property within company wrappers, so what he said next did not disappoint - there will now be a 15% stamp duty on properties purchased by companies. An additional band of stamp duty of 7% was also announced, on
purchases of residential properties over £2m.
child benefit . . .
George Osborne had got himself into a bit of a pickle over this one, weeks before todays budget. Quite simply, righteous indignation had been raised over the so called "cliff edge" implementation of the child benefit cut-off proposal. That is, a single earner earning one pound over the higher rate tax threshold would loose all child benefit. The Chancellor stressed today, that although higher earners must be seen to making their contribution to reducing the deficit, it must also be fair, and there should not be any cliff edge situations.
So, child benefit withdrawal will commence when a taxpayer is earning £50,000 and will be reduced by 1% for every £100 over. This means that child benefit will be completely withdrawn when the taxpayer earns £60,000.
income tax . . .
The contenious part was always the 50p (so called additional rate) tax for those earning over £150,000. There had already been reports that the tax receipts were a lot less than we were led to believe, and the Chancellor discussed the HMRC report. He referred to "massive distortions in the market" and explained that self assessment tax receipts were £3bn below forecasts.
The HMRC report went on to show that there would be only a £100m drop in receipts by going from 50p to 45p. "No Chancellor," he said, "can justify a tax rate that damages our economy and raises next to nothing."
What he actually meant, is that the drop of £100m in tax receipts is an estimate based on behaviour changes - taxpayers would retreat from their tax avoidance strategies. A like for like drop in revenue - multiplying the taxed income by 5p - would actually be closer to £3bn, and that is probably what Ed Balls was referring to when he complained of a £3bn gift to the rich.
As a sop to the liberals, he emphasised that the new taxes he has just raised on the rich (stamp duties and tax avoidance measures), will raise 5 times as much as that received from the increase from 40p to 50p.
Thus, the additional rate will therefore be reduced to 45p - but not until April 2013.
And then there's the rest of us. How close will he come to realising the coalition goal of reaching £10,000 threshold in this parliament?
The personal tax allowance will rise to £8,105 this April and £9,205 next April. He said, "this Government will have taken 2m people out of tax altogether."
he ended on these words . . .
"This country borrowed its way into trouble . . .
now we're going to earn our way out!"