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George Osborne delivers 2012 Budget

George Osborne delivers 2012 Budget

Category: Economy

Updated: 21/03/2012
First Published: 21/03/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Chancellor of the Exchequer George Osborne delivered his 2012 Budget in the Commons today, promising to increase personal allowances.

In an hour long address to the House, he said that from April 2013, people will be able to earn £9,205 before they have to pay income tax.

The Government forecasts that it will help to make 24 million people £220 a year better off, and marks the next step in an effort to eventually increase the personal allowance to £10,000.

The increase in the personal allowance will help millions of people to be lifted out of income tax.

George Osborne said it was a 'working budget'.

However, in an impassioned response, the Leader of the Opposition, Ed Milliband, labelled the announcement a 'Budget for millionaires'.

His call was based on the cut in the higher rate of tax from 50p to 45p, which he said would given the richest people in the country a tax cut worth thousands of pounds.

Stamp duty

  • This was challenged by the coalition which said that the measures in their entirety would substantially increase tax paid by the rich.
  • Such measures include a 7% stamp duty tax for properties worth £2 million or more, while homes purchased through companies – which has previously been used to avoid tax – will be subject to a 15% levy.
  • There were no real surprises for the City of London, with a small increase in the bank levy to 0.105% that will raise around £2.5 billion per year.
  • George Osborne also outlined a number of new measures to stop people dodging taxes that will help cover the cost of the cut in the higher rate of tax.

Personal finance

  • In changes to original plans, child benefit staggered will be for families earning £50,000 or more, with benefits falling by 1% for every £100 over that amount. Families on more than £60,000 will have their benefit cut entirely.
  • And it was revealed that the state pension will be routinely reviewed to make sure the age at which people can take their money is in line with the increases in how long people are living.
  • But those people approaching 65 have been told that they will no longer be eligible for higher personal allowances.
  • Previously, pensioners had been given a larger personal allowance than those under 65; but new pensioners will now have the same personal allowance as working people.
  • Existing pensioners will be allowed to keep their existing allowance. The Government said it was part of a simplification of the tax system which includes a single tier state pension of £140 a week, and that will save around £1 billion.

Economic growth and business

  • Mr Osborne was able to deliver slightly better news on the economy; the independent Office for Budget Responsibility (OBR) has revised up growth predictions for the UK this year to 0.8%.
  • Growth is then forecast to hit 2% in 2013, 2.7% in 2014 and 3% in each of the following years.
  • A number of tax relief proposals were outlined to boost such markets as the pharmaceutical industry, the video games sector and high end television production.
  • The Chancellor is looking to boost growth in the UK by cutting corporation tax for firms to 24% next month and 22% by 2014. He talked up the measure saying it compared favourably to other leading global economies and carried the message that the UK is open for business.
  • The OBR has also predicted that unemployment will hit a peak of 8.7% this year before falling to 6.3% in 2016-17.

Traditional duties

  • There was little to cheer for motorists in the Budget, with no fuel tax cut, as was also the case with alcohol.
  • By contrast, tobacco products were hit with hefty increases in duty, with tax set to rise by 5% above inflation by the end of today, meaning a pack of cigarettes will cost around 37p more.

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