Managing Your Money 

The Budget - summary, analysis and reaction

Budgets are at least getting more interesting. This year's was billed as a "Budget for growth", a response to Opposition criticism that Mr Osborne is only interested in cutting. However, with inflation double the Bank of England's target and the deficit still huge, his scope for meaningful action is limited.

Summary:

A fiscally neutral budget is a recognition of the fact that Mr Osborne's hands are tied. A politically popular cut in fuel duty funded by more tax on oil and gas producers (a trick that Gordon Brown also used). The threshold for income tax rises, but future rises will be pegged to consumer prices rather than retail ones - giving today, but taking away tomorrow. A plethora of micromanagement of reliefs and allowances to "encourage enterprise" despite a commitment to simplify the tax code.

The economy:

■ The Office of Budgetary Responsibility forecasts weaker growth for 2011 of 1.7 per cent, blamed on a weak fourth quarter in 2010 and high commodity prices. Inflation to remain around 4.5 per cent this year but fall to 2.5 per cent and then 2.0 per cent.

Personal taxation:

■ Public-sector workers earning less than £21,000 a year will receive a £200 salary uplift.

■ The personal income tax allowance will rise by £630 to £8,105 in April 2012. But future rises will be calculated based on consumer prices rather than retail prices, as rises in state benefits are already. Fiscal drag in action!

■ Inheritance tax will be reduced by 10 per cent for those who leave 10 per cent of their estate to charity.

■ Consultation on possible merger of the tax and national insurance systems to simplify calculations and increase transparency.

■ Increase in tax relief for enterprise investment schemes from 20 per cent to 30 per cent plus increases in subscription limits and eligible company size.

Indirect taxation:

■ Air passenger duty to remain levied on a per-passenger basis but with some adjustment of the bands. Private jets to be subject to taxation - the so-called 'Learjet levy'.

■ No significant changes in alcohol or tobacco taxation, or to VAT.

Fuel duty:

■ Cancellation of fuel duty escalator and 1p/litre reduction in fuel duty, financed by an increase in taxation on North Sea oil production from 20 per cent to 32 per cent. If oil prices fall below 75 per cent, this will be reviewed and the fuel duty escalator reinstated.

■ HMRC mileage rate for business car users increased to 45p/mile from 40p/mile.

Corporation taxation:

■ Previously announced 1 per cent reduction in corporation tax uprated to 2 per cent, and more falls thereafter, reducing UK corporation tax to 23 per cent.

■ Possible discounted rate in Northern Ireland to facilitate competition with Eire's 12.5 per cent rate.

■ The bank levy will be adjusted to make sure that banks do not benefit from lower corporation tax - rebalancing the economy and all that.

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