Chancellor cuts 50p rate in Budget
21 Mar 2012
Chancellor George Osborne began his third Budget speech with a pledge to support working families, through ‘far-reaching reform’ of the UK tax system.
Asserting that Britain will avoid a ‘technical recession’ and will ‘earn its way in the world’, the Chancellor announced that the UK’s economic growth forecasts remain broadly unchanged from the Autumn Statement, with the growth forecast for 2012 revised upwards slightly to 0.8%.
Among the key announcements was confirmation of a cut in the 50p top rate of income tax. Confirming recent speculation, the Chancellor emphasised that the rate has ‘damaged competitiveness’, although the reduction of the rate to 45p will not take effect until April 2013.
Meanwhile, a significant proportion of the Chancellor’s speech centred on personal tax allowances. With the income tax personal allowance already set to rise next month, the Chancellor confirmed that a further rise will take place in 2013, taking the allowance to £9,205. Age-related allowances for pensioners will also be simplified from 2013.
The Chancellor made a number of announcements of significance for business, including a doubling of the planned reduction in the headline rate of corporation tax, which will see the rate fall from 26% to 24% in April 2012. The UK’s smallest firms, with a turnover of up to £77,000, are also set to see a ‘radical reform’ of the tax administration system.
The tax cuts announced are to be funded by a clampdown on tax avoidance, including the introduction of a new 7% Stamp Duty Land Tax on residential properties worth over £2m, together with a 15% duty on properties purchased through a company. A new cap will also be applied to previously uncapped tax reliefs, set at a rate of 25% of total income (or £50,000 if greater) for those claiming relief in excess of £50,000 a year.
Controversial plans to withdraw child benefit for higher rate taxpayers have also been modified, with the Chancellor announcing that the benefit will be reduced by 1% for every £100 of earnings in excess of £50,000 a year.
Despite recent campaigns, the Chancellor stated that there would be no change to the planned 3p increase in fuel duty, which will take place in August. The price of tobacco, meanwhile, will see an increase of 5% above inflation.
Additional measures announced include the introduction of tax credits for the video games, animation and high-end television production sectors, a new annual statement of Government spending for taxpayers, and a temporary relaxation of Sunday trading laws, to cover eight weekends during the Olympics and Paralympics.