Osborne unveils 'progressive' Budget

The new Government unveiled a ‘progressive’ Budget today, promising there would be no surprises hidden in the small print of its ‘tough but fair’ proposals.

In a 55-minute speech to the House of Commons, Chancellor George Osborne announced that moves to address the nation’s financial deficit would comprise 77% spending cuts and 23% tax rises.

While milder-than-expected changes to corporation tax rates and capital gains tax were met with some surprise by ministers and online commentators, the most fervent reactions were reserved for the widely anticipated increase in VAT to 20%, which the Chancellor said was “unavoidable”. The deputy speaker of the House was forced to demand calm from MPs when they loudly heckled Mr Osborne en masse.

'Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget,' claimed the Chancellor, whose changes removed almost one million people from the income tax system.

He added: 'Today, we take decisive action to deal with the debts we inherited and confront the greatest economic risk facing our country. We’ve been tough, but we’ve also been fair.'

The Budget’s main tax changes are presented below in brief. Taxation.co.uk will bring you more comment and analysis of the day’s events soon.

Capital gains tax will remain at 18% for low-income and middle-income taxpayers, but higher rate taxpayers will pay 28% from midnight.
 

• Corporation tax will be cut to £27% in 2011, and then by 1% annually for the following three years (to reach 24%).
   
• The small companies' tax rate will reduced to 20%.
   
• Entrepreneurs’ relief is to be increased to £5 million.
   
• Income tax: the basic personal allowance is to be increased by £1,000 to £7,475 in April next year.
   
• The standard rate of insurance premium tax will be 6% from 4 January 2011, when the higher rate will become 20%.
   
• National Insurance: the threshold at which employers will begin to pay is to rise by £21 per week, above indexation, from April 2011.
   
• VAT: main rate to rise by 2.5% to 20% on 4 January next year. Zero-rated items, such as children's clothes and books, will remain so.
   
• Tax relief for the video games industry will be abolished.
   
• Plans for a ‘broadband tax’ to fund faster web connections will be dropped.

Categories: News , Budget 2010 , VAT