The Chancellor Alistair Darling has just delivered his last pre budget report before the election.  His forecasts from the Budget still stand, the deficit will increase by a small amount to £178bn from forecast and he is still forecasting growth of 1.5% for next year and 3.5% for the following 2 years.  He wants to reduce the deficit by 50% in 5 years, but how will all of this affect you?

For businesses

  • Small company corporation tax held at 21% for another year
  • Extra 0.5% increase in NI from 2011 on top of  an increase of 0.5% in 2010 – this will raise £6bn in 2012
  • Corporation tax rate on income from patents 10% to encourage innovation
  • Empty property rate relief extended

For people

  • Higher rate tax band to be frozen at £43k from April 2012
  • Inheritance tax threshold held at £325k, not increased to £350k as forecast in April
  • Over half additional revenue raised in PBR will from top 2% of earners
  • State pension increase by 2.5%, this equates to 4% effective rate as inflation figure was  negative at review time
  • Child and disability benefits increase by 1.5%
  • £200 incentive to replace old/inefficient boilers
  • Extension of free school meals
  • Under 24s eligible for training after 6 months of unemployment
  • Over 50s to receive more help to keep out of unemployment

The public sector

  • Public sector pay increases limited to 1% from2011/12

Other headlines

  • 50% levy on bank bonuses over £25k to discourage discretionary bonuses
  • 50p per month tax on landlines to fund faster broadband
  • Electric cars exempt from car tax
  • Continued investment in creative technologies. Pharma and biotech will benefit most

Summary

It is a mixed budget with some across the board increases in NI, while trying not to stifle the economic recovery.  Big savings are being made in the public sector while trying to encourage green issues and innovation.  Many of the changes are post election and some a number of years away as the Government tries to get the country out of recession and at the same time repay the deficit.