Emergency Budget 2010 - Summary
There were 45 Budget Notes issued yesterday, totalling 107 pages, addressing a wide range of topics. 'Tough but fair' was the theme of George Osborne's first Budget. With no pre-budget warm up there was much speculation on how he would tackle the UK's debt. He split his statement into three main categories: deficit reduction, enterprise and fairness. In simple terms, the Government will look to apply an 80/20 rule on how it will tackle the debt over the next four to five years. 80% of the reduction will be driven by spending reductions including welfare reform savings and 20% from net tax increases. The welfare reforms appear to represent around a third of the spending reductions. These include reforms to housing and disability benefits and the tax credit system, as well as freezing child benefit for the next three years. For the basic state pension, however, the earnings link will be restored from April 2011 with a minimum increase guarantee of 2.5% or in line with inflation if higher. Headline changes to tax relate specifically to Value Added Tax (VAT) and Capital Gains Tax (CGT) as well as an increase to the income tax personal allowance. While the increase in the personal allowance will benefit those with lower incomes, the higher rate tax threshold will be reduced meaning there is no net benefit for those individuals and potentially may mean more tax payers fall into higher rate income tax going forward. The Government also announced its intention to create an independent Office of Tax Simplification, something which we should all welcome!