CHANCELLOR George Osborne slashed the top rate of tax for the biggest earners today, claiming that the controversial 50% rate was damaging the economy.
He pressed ahead with the move - unpopular with some Liberal Democrats - after revealing that an official report by the taxman had found it was raising ``next to nothing".
He also reduced proposed cuts to child benefits paid to the better off.
But he increased the threshold at which everyone starts paying tax to £9,205, claiming millions of working people would be £220 a year better off as a result.
The cut in the top rate of income tax to 45p in the pound for all income over £150,000 from April 2013 was countered with a hike in stamp duty on homes worth over £2 million from 5% to 7%.
The Chancellor also confirmed a crackdown on various tax loopholes used by the rich including a 15% stamp duty rate on homes held through companies.
Overall, Mr Osborne claimed his measures would raise five times more from the wealthy than the 50% top rate introduced by Labour.
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But Labour leader Ed Miliband said the Budget meant millions would pay more while millionaires paid less.
"It is a millionaires’ budget that squeezes the middle," he said.
The Chancellor has been besieged with calls from the motoring lobby for a cut in fuel duty as forecourt prices have soared to record highs.
But Mr Osborne ignored them, declaring: "I do not propose to make any further changes to the fuel duty plans already set out."
He also dealt a blow to smokers saying that duty on all tobacco products would rise by 5% above inflation - slapping 37p on a packet of cigarettes from 6pm tonight.
The Chancellor also signalled that millions of workers may have to work longer before they can retire.
Mr Osborne told MPs: "I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity."
That raised the prospect of ever longer working lives.
Mr Osborne also set a target for savings in the welfare budget of £10 billion by 2016.
However, there was some good news as he revealed that the withdrawal of British troops from Afghanistan by the end of 2014 meant military operations there would £2.4 billion lower than expected.
The Chancellor predicted slightly better than expected economic growth as he unveiled a Budget which he said ``rewards working families and helps those looking for work".
Mr Osborne said the Office for Budget Responsibility expects UK plc "to avoid a technical recession with positive growth in the first quarter" of this year.
He said the OBR had reported that the economy has "carried a little more momentum into the new year than previously anticipated".
He added: "Indeed, the Office for Budget Responsibility is slightly revising up in their growth forecast for the UK this year to 0.8%."
This is up from 0.7% last autumn.
The OBR is also predicting growth of 2% next year, 2.7% in 2014 and 3% in both 2015 and 2016.
Mr Osborne also gave an upbeat assessment of attempts to beat down the UK’s debt mountain.
He said Public Sector Net Debt is set to peak at 76.3% of GDP in 2014-15, almost 2% lower than previously forecast - before falling the following year.
There was good news in the Budget for business as the Chancellor announced another 1% cut in the rate of corporation tax from next month to 24%.
He said that by 2014, the rate would be 22% which is "dramatically lower" than competitors.
He said there would be no further changes to alcohol duty rates.