Emergency Budget: George Osborne announces full plans

Emergency Budget: George Osborne announces full plans

22 June 2010 / by Lois Avery

After weeks of speculation George Osborne has announced the Government’s economic plans for the next five years.

Here is a brief overview of the main points:

Capital Gains Tax
Despite fears that CGT was set to rise to 40 per cent the Government has decided to increase it to 28 per cent for higher rate tax payers but it will be kept at 18 per cent for low and middle rate tax payers.

The rise to 28 per cent will take effect from midnight tonight.

The £10,100 tax exemption will remain in place.

Income Tax
The level you begin paying income tax will rise by £1,000 in a move to benefit lower earners.

VAT
From January 4 2011, the main rate of VAT will rise from 17.5 per cent to 20 per cent. Current zero-rated items like children's clothes and magazines will remain exempt.

No increases will be made on cigarettes, alcohol or fuel and Labour’s measure to tax cider will also be abolished.

Corporation Tax
This will be cut next year to 27 per cent, and by 1 per cent annually for the next three years, until it reaches 24 per cent. The small companies' tax rate will be cut to 20 per cent.

Pensions
The state pension age will rise to 66 and the default retirement age will be set out, as speculated ahead of the budget.

Pensions will be linked back to earnings with a triple lock system in place so that pensions rise with earnings, prices or 2.5 per cent – whichever is higher.

Benefits

From 2011, except for the state pension and pension credit, benefits, tax credits and public service pensions will rise in line with consumer prices rather than retail prices.

Tax credits will be reduced for families earning over £40,000 next year and child benefit will be frozen for the next three years.

Housing benefit will also be capped and councils will be eligible to freeze council tax if they meet certain low spending cut requirements.

Banks
A banking levy will be introduced from 2011 to ‘ensure banks make a fair contribution to reflect the risk they pose’.

Public sector pay
A 2 year freeze will be imposed on public sector workers earning over £21,000 and pension contributions will be dealt with to curb ‘spiraling’ costs.
A full review of public sector pensions will be undertaken before the next budget in 2011.

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