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Key points from June Budget

Jun 22 2010 By nebusiness

HERE is a summary of the key measures introduced by Chancellor George Osborne at this afternoon's emergency Budget, the coalition government's first.

The Chancellor began by condemning the previous government's handling of the economic crisis, and describing the current state of the UK's deficit, stating that one pound in every four we spend is being borrowed.

Mr Osborne said the state now accounted for "almost half" of all national income which was "completely unsustainable".

He then previewed the Budget by announcing an 80:20 rule of thumb, with cuts over tax rises preferred.

Economic growth & inflation

UK economic growth for the next five years is estimated to be 1.2% this year, 2.3% next year, then 2.8% in 2012 and 2.9% in 2013.

Consumer price inflation is expected to reach 2.7% by the end of the year, returning to target in the medium term. The inflation target remains at 2% as measured by the Consumer Prices Index.

Unemployment

The UK's unemployment rate is forecast to peak at 8.1% this year and then fall for each of the next four years to reach 6.1% in 2015

Debt & borrowing

Borrowing is to fall from 10.1% to 1.1% of GDP by 2015. Public sector borrowing will be £149 billion this year, £116 billion next year, £89 billion in 2012-13 and £60 billion in 2013-14.

There are to be no further reductions in capital spending.

Public sector workers were handed a two-year pay freeze unless earning under £21k. Workers beneath this salary level will receive a flat pay increase of £250 for the next two years.

The government will accelerate the increase in state pension age to 66.

Children & benefits

Child tax credits are to be reduced for those earning more than £40,000 from next year.

SureStart grants will apply to the first child only. Most controversially, child benefit is to be frozen for three years.

Housing benefit is restricted significantly. There will be a maximum limit of £400 a week, to save £1.8 billion a year by the end of the Parliament.

The government will introduce a medical assessment for Disability Living Allowance from 2013 for new and existing claimants.

Business tax

Corporation tax rates are to be reduced from 28% to 24% over four years. Small companies will pay less tax - for them, the corporation tax rate will be reduced to 20%.

Capital allowances are to be reduced from 20% to 18%. Annual investment allowance for businesses to be reduced to £25,000 per year.

There will be a banking levy from January 2011.

New businesses in the regions will have National Insurance tax breaks - new firms will be exempt from NI for first ten jobs.

Tax relief for the video games industry will be scrapped.

VAT

VAT is to rise to 20% from 4 January 2011, generating £13 billion a year extra revenue. There are no changes to categories of goods exempt from VAT such as food, children's clothes.

The council tax freeze was confirmed. Low-spending councils in England will be given government help to freeze council tax for one year from April 2011.

Income & capital gains tax

The capital gains tax regime is to be reformed. The headline rate will be increased from 18% to 28%. Entrepreneur's relief is to be extended to first £5 million of lifetime gains.

The tax-free personal allowance is to be increased by £1,000 from 1 April 2011. The 50% band remains in place as expected, as do the pension restrictions.

National Insurance

The National Insurance threshold is increased, lifting 650,000 people out of NI altogether. From April 2011, the threshold at which employers start to pay National Insurance will rise by £21 per week.

Tobacco & alcohol duty

There are to be no changes at this stage.