Emergency Budget

All the key points from the chancellor’s emergency Budget speech

• Calling it an “unavoidable Budget”, George Osborne says Budget details will not be buried in the book.
• Everyone will have to contribute to the recovery, but everyone will also share in the eventual prosperity.
• Estimated growth in the UK economy should hit 1.2% this year, 2.3% next year, 2.8% in 2012, 2.9% in 2013 and 2.7% in both 2014 and 2015.
• CPI rates will be 2.7% at the end of the year before returning to target “in the medium term”, which remains at 2%.
• The UK’s borrowing will fall to 1.1% of GDP within five years.
• Public sector net debt to fall to 67% of GDP by 2015/2016, compared to increases proposed by the previous government.
• Unemployment to peak at 8.1% this year before falling back to 6.15 by 2015.
• Most of the deficit reduction will come from spending cuts. 77% of the reduction will come from savings, while 23% will come from tax rises.
• George Osborne says the structural deficit will be plugged by 2015/16 and is set to be cleared one year early.
• The Civil list will be subject to the same audit by the National Audit Office and will be frozen at £7.9m annually.
• An extra £17bn in savings in public services has been found, equivalent to a 25% across the board cut. Final details will be in the spending review released on 20 October.
• Public sector pay will be frozen for two years, but the 1.7m people earning up to £21,000 will receive a pay rise of £250 a year.
• The small companies rate will be cut to 20%.
• Housing Benefit to be reduced by £1.8bn by the end of Parliament.
• Corporation tax will fall to 24% by 2014, dropping 1% a year.
• Tax relief for the video games industry has been repealed.
• Plans to increase broadband access across the country will be funded by the private sector and not through a broadband levy.
• The threshold for employers National Insurance Contributions will be increased.
• Employers outside of London and the South East will be exempt from National Insurance Contributions for the first £5,000 up to ten employees.
• About £2bn will be raised via a new banking levy charged to large banks.
• The standard rate of VAT will rise to 20% from 17.5% on 4 January 2011, bringing in £13bn a year of extra revenue.
• The increase in cider duty will be reversed at the end of the month.
• Duties on alcohol, tobacco and petrol will remain the same.
• There will be a review of oil prices in time for the next Budget aimed at stabilising pump prices. A further announcement on aviation tax by the next Budget is also expected to change a tax structure which charges each passenger to a per flight tax.
• Personal tax allowance to rise to £7,475 in April, making 23 million taxpayers an extra £170 a year better off and taking nearly a million people out of income tax.
• Capital Gains Tax stays at 18% for standard rate taxpayers but from midnight, those paying the higher rate will see CGT rise to 28%.
• The chancellor has announced that while the CGT rate for entrepreneurs’ relief will remain at 10%, the limit is to increase from £2m to £5m.
• Capital allowances are cut to mitigate more a generous corporation tax regime.
• Allowances for plant and machinery operations are reduced from 20%-18% and from 10%-8% for longer lived assets.
• Pensions will be re-linked to earnings, the state pension will increase in line with the consumer price index or 2.5% whichever is greater.

Story from:
Accountancy Age

Watch the Budget Live

Watch the budget live from Westminister

http://www.parliamentlive.tv/Main/Player.aspx?meetingId=6369

Osborne: Budget will be Harshest for 30 Years

Chancellor George Osborne will claim today that the harshest Budget for 30 years will squeeze the rich more than it hits the poor. He will seek to sell his package of record spending cuts and tax rises as being stamped by fairness as he tries to win public support for a four-year austerity drive.

Nick Clegg moved to pre-empt any revolt by Liberal Democrats last night by insisting that his party’s values were at the heart of Osborne’s assault on the deficit. “This is one of the hardest things we will ever have to do,” he wrote in an e-mail to party members, an acknowledgement that the pain to come will put the coalition under immense strain, The Times reported.

When he delivers the Budget statement, at 12.30pm to the Commons, Osborne will insist that everyone is making a contribution as he tries to distinguish his measures from anything that Labour could portray as a Thatcherite attack on the poor.

A table in the Treasury Red Book, broken up into ten different income bands, will show that the wealthiest will be hit proportionately hardest, according to The Times. This does not factor in how cuts to public services will affect different parts of the country and income groups, nor does it include the Government’s impending drive on benefits.

The Budget will take 880,000 people out of income tax altogether by raising the threshold at which tax is owed by £1,000. Future Budgets will raise the threshold, taking hundreds of thousands more out of income tax — a key Liberal Democrat policy.

A key Tory policy — saving employers the cost of national insurance contributions — will mean that 650,000 workers will be exempted by raising the earnings threshold at which bosses have to start paying.

from AccountancyAge

Elgar Note Fades as 30 June Deadline Looms

The £20 banknote bearing the portrait of composer Sir Edward Elgar, has less than two weeks left in everyday use. On 8 March the Bank of England announced the note’s withdrawal from circulation on 30 June 2010. After this date the Elgar note will no longer have ‘legal tender’ status so will be less likely to be accepted in payment or in change, in retail outlets. The Adam Smith £20, first introduced in 2007, has gradually replaced its Elgar predecessor and continues in circulation.

Andrew Bailey, the Bank’s Chief Cashier and Executive Director, Banking Services, said, “People still holding any Elgar notes should deposit, spend or exchange them now, to avoid any possible difficulties in being able to do this readily after 30 June.” But he wanted to reassure the public, saying, “For several months from the end of June most banks, building societies and Post Offices should accept Elgar £20 notes for deposit to customer accounts and for other customer transactions, although the choice to exchange the notes rests with each institution.” And should anyone have any difficulties or discover their Elgar notes much later, he added, “The Bank of England will always give value for these notes and in fact all other banknotes the Bank has issued.”

Information on how to return Elgar notes to the Bank of England for exchange can be found at: http://www.bankofengland.co.uk/banknotes/about/exchanges.htm

The Elgar £20 banknote was first issued on 22 June 1999. The Adam Smith £20 banknote was first issued on 13 March 2007. In 2009-10 there were some 1.5 billion £20 banknotes in circulation, making it the most common note. Most of these were the Adam Smith notes. The average lifespan of a £20 note is 2 years.

‘Legal tender’ means that if a debtor pays in legal tender the exact amount they owe under the terms of a contract, they have a good defence in law if they are subsequently sued for non-payment of the debt. In practice, the concept of ‘legal tender’ does not govern the acceptability of banknotes as a means of payment. This is essentially a matter for agreement between the parties involved.

The Elgar notes are being withdrawn under authority given to the Bank by virtue of Section 1 (5) of the Currency and Banknotes Act 1954.

Budget Confirmed for 12:30 Start

Chancellor George Osborne has confirmed that he will announce his emergency Budget statement on Tuesday 22 June at 12.30pm.

The address has been brought forward by three hours from its original time of 3:30pm.

Speaking at the Treasury’s offices Mr Osborne said he wanted a Budget that would “show that Britain can live within its means and…provide the solid foundation for a private sector recovery.”

He added that Treasury chief secretary Danny Alexander would meet Cabinet colleagues this week to agree £6bn of cuts in this year’s spending.

UK To Stagger Corporate Tax Cut

The Treasury’s Commercial Secretary has announced the Government’s plans to reform corporation tax over the five-year term of the current parliament.

Speaking in the House of Lords, Lord Sassoon repeated the government’s commitment to “lower, simpler and more predictable taxes.” The secretary said that this month’s budget would include a so-called road map to set out the government’s plans to reform and reduce the tax over the lifetime of this government and to make the tax rate the most competitive of all industrial countries.

Lord Sassoon went on to stress the importance of tax and deregulation to ensure that British industry remains competitive. The secretary, who is responsible for business and financial services in the new government, emphasized that as well as a commitment to bring the UK rate of corporation tax down to the lowest in the G20 within the lifetime of this government, it would be necessary to keep a close watch on regulation and regulatory powers.

The Chancellor George Osborne had already made a pledge to cut corporation tax in a speech he made at the annual Confederation of British Industry (CBI) dinner on May 19. Though the Tory manifesto pledge to cut the tax from 28% to 25% is expected to be honoured, Lord Sassoon’s comments in the House of Lords suggest that the reduction in the rate of corporation tax will take place over the next five years rather than in one hit. Details are expected in the budget statement later this month. Should the rate be cut it will result in the lowest rate of corporation tax in the UK for 45 years.

Though cutting the rate of tax by 3% would cost the Treasury GBP4.5bn per year, the Chancellor suggested that some of the loss of revenue could be recouped by taking additional measures, such as repealing tax relief schemes and tackling tax avoidance.

The CBI generally welcomed the Chancellor’s remarks and Lord Sassoon’s comments have reinforced the likelihood of the tax being cut when the budget is announced later this month.

from Taxnews.com