Pre-Budget update 8

Dec 9 2009 By Andrew Mernin

The Chancellor has decided against a windfall tax on banks, but if they pay substantial rewards to staff they will pay a one-off levy of 50% on any bonus above £25,000.

The one-off bonus levy is expected to yield £550m, which will pay for measures to help the young and older unemployed back into work.

Employer pension contributions to be included in definition of tax income relating to pensions tax relief for those earning over £130,000.

Individual Inheritance Tax allowance to be frozen at £325,000 for the next year.

In April 2012, the point at which people start paying 40% income tax to be frozen for one year, hitting those earning more than £43,000.

Government measures mean more than half of additional revenue raised will be paid by the top 2% of earners.

Spending Review ruled out, with the Government sticking to its spending plans for next year.

Current spending growth to fall to an average of 0.8% a year between 2011 and 2015, meaning cuts to some budgets and some programmes stopped altogether.

£5bn to be saved from spending programmes, including cutting back on major IT projects, reforming legal aid and outsourcing inefficient prisons.

State contributions to public service pensions for teachers, councils, NHS and the civil service to be capped by 2012, saving £1bn a year.