Budget 2011: what does it mean for you?
- 23 March 2011
- From the section Business
Chancellor George Osborne has delivered his second Budget since the election of the coalition government in 2010.
Addressing MPs, Mr Osborne said he did not need to ask the public for more taxes or more spending cuts.
"This is not a tax-raising Budget, nor can we afford a give-away," he told MPs as he opened his comments.
However, plenty of interesting changes and proposals were announced.
So no big tax changes as a result of this Budget?
Far from it. Following advice from the Office of Tax Simplification, the government has decided on a huge change to the UK's tax system. As signalled in advance, the government will now consult on merging the national insurance system with that of the income tax system.
As Mr Osborne said, it will take several years to conduct the necessary consultation and complete whatever changes are eventually agreed.
Despite the chancellor's opening statement, I see corporation tax is being cut?
Mr Osborne wants to tell the whole world, particularly those bits with lots of money to invest, that the UK is "open for business". So the current rate of corporation tax will be cut by 2% from April 2011 instead of the 1% as previously announced. But more than that it will also drop by 1% in each of the next three years to reach 23%.
Banks, however, will see their bank levy rise to compensate for this.
What about personal taxes for the average tax payer?
The lowest paid will benefit, with a further increase in the size of the personal tax allowance.
This will rise again, by £630 to £8,105 in April 2012.
That is on top of the increase this April of £1,000 which takes the personal allowance to the first £7,475 of a taxpayer's income.
Meanwhile tobacco duty will rise by 2% above inflation, as previously announced.
Vehicle excise duty will rise in line with inflation, though it will be frozen for heavy goods vehicles.
But fuel duty will be cut by 1p per litre from tonight.
In addition, the planned inflation-linked increase in fuel duty, scheduled for next week, is delayed until 2012.
And the additional fuel duty "escalator", that automatically adds 1p to fuel duty on top of inflation each year, is now cancelled for the duration of this Parliament.
Some people - the non-doms - are going to pay more?
Yes, the annual charge introduced by Labour on the so-called non-domiciled taxpayers will go up from £30,000 for those here for seven years to £50,000 for those in the UK for 12 years.
This will bring in an extra £200 million to the Treasury.
What about home owners, or those who would like to buy?
The government is going to try to help first-time buyers to obtain a mortgage. Its proposed shared-equity scheme will be aimed at helping 10,000 families buy a home for the first time. The cost of doing this - put at £250m - will be financed by the proceeds of the bank levy.
Meanwhile, one of the existing help schemes for existing homeowners in financial difficulty will be extended.
The Support for Mortgage Interest scheme will last at least an extra year until January 2013, which Mr Osborne said would cut the mortgage arrears of 100,000 homeowners who become unemployed.
It looks as if big changes are afoot for pensions?
Indeed. The government is going to set about planning a new "single-tier" state pension system", offering a weekly pension of £140 per week.
However this will affect new pensioners only, not those who have already retired by the time any such changes come in.
The government is also going to devise a way in which the state pension age rises automatically in line with increase in longevity.
And there will now be a formal consultation on implementing the recent proposals of Lord Hutton for public service pension schemes .
The two main recommendations were that the scheme should be converted from final-salary plans to ones where the pension is based on a member's average earnings over their career.
The normal pension age of the schemes will also rise too, in line with forthcoming increases in the state pension age.
Inheritance tax is being tweaked?
Yes. From April 2012, people who leave 10% or more of their estate to charity will receive a 10% reduction in their inheritance tax bill. The government estimates this will bring in an extra £300 million for charities.
There is some modest cheer for some public sector workers?
Modest is probably the word. This year most of them will continue to endure a pay freeze. But increases of £250 are being offered to members of the armed forces, along with prison and NHS staff, teachers and civil servants - but only if they earn less than £21,000.