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Did you listen to the Budget announcement yesterday by Chancellor George Osbourne?
It has been probably one of the most uneagerly anticipated budgets in recent years as it was expected to bring cuts in a bad way and rises in a, well, bad way. Lets take a look what was actually announced:
- VAT on goods and services is going up on 4 January 2011 from 17.5% to 20%.
Why? The increase will generate more than £13bn a year by the end of 2014-15 to offset the deficit.
- From today Capital Gains Tax (CGT) will rise to 28% for taxpayers on higher income tax rates.
Why? It’s all about the deficit, the CGT changes should bring in an extra £1bn.
- The 10% CGT rate for entrepreneurs will be extended from the first £2m of qualifying gains to £5m.
Why? To encourage new business start-ups, the foundation of the economy, and to help young companies.
The personal income tax allowance is to be increased by £1,000 in April next year to £7,475.
Why? This is a Lib Dem drive to eventually raise the allowance to £10,000. This initial rise will mean 23 million basic-rate taxpayers will save up to £170 a year.
- Food items and children’s’ clothing will remain zero rated.
- No increases in duties on alcohol, tobacco or fuel and the 10% cider rate has been scrapped.
- Benefits, tax credits and public service pensions will be no-longer be uprated by the retail prices index, instead the lower consumer prices index will be used.
Why? It will save the government £6bn a year.
- Tax credits will be cut for households earning more than £40,000 next year.
- The ‘Health in Pregnancy’ grant will be removed from April 2011.
- Lone parents will now have to look for work once their youngest starts school.
- Child benefit for all families will be frozen for the next 3 years.
- A medical assessment for Disability Living Allowance will be introduced from 2013 for all claimants to cut down on the number of people claiming it.
- Housing benefit will be restricted to a maximum limit of £400 a week.
Why all of these changes? They will save £11bn a year over the next 5 years.
- The National Insurance threshold will rise by £21 per week above indexation in line with inflation.
- Corporation tax will be cut in April to 27%, and then drop 1% annually for the next 3 years, down to 24%.
- The small companies’ tax rate will drop to 20%.
Why? All of these changes are aimed at giving businesses more of a reason to keep people employed.
- There will be a 2 year pay freeze for workers in the public sector, but those who earn less than £21,000 a year are exempt and will receive pay increases of £250 a year for each of the two years.
THE END. (hopefully not)
So there it is, the Budget 2010 and we’ll all be affected. But just how much will you feel the changes? Let us know in the comments below.
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