Chancellor of the Exchequer George Osborne has delivered the 2012 Budget with a focus on stimulating growth in the economy and consumer spend.
Chancellor Osborne said: ‘This Budget rewards work. Britain is going to earn its way in the world. It supports working families and helps those looking for work and unashamedly backs business.’
The key points of the 2012 Budget are summarised below.
Osborne has confirmed key changes affecting the top and bottom brackets of tax rates, including:
- Top rate of income tax reduced from 50p to 45p from April 2013.
- Personal income tax allowance is already set to rise from £7,475 this year to £8,105 from April but it will go up again by £1,100 to £9,205 from April 2013 putting an extra £220 in your pocket over the course of a year. This equates to about £18.30 a month.
In addition, a personal tax statement detailing how much of your money goes on the NHS, defence and benefits, among other sectors, is to be sent to 20 million taxpayers from 2014.
Child benefit and council tax
Child benefit will be phased out when someone in a household has an income of more than £50,000. It will fall by 1% for every £100 earned above £50,000. Only those earning more than £60,000 will lose the entirety of the benefit.
Those in the Armed Forces serving overseas will receive 100% relief on the average council tax bill.
The automatic review of State Pension Age, already due to rise to 65 for women in 2018 and to 66 for men and women in 2020, will be increased in line with increasing life expectancy. Age rises to 67 and 68 are in the pipeline but dates for this are not yet certain.
Age-related allowances for pensioners are to be simplified over time, starting in April 2013, which will eventually create a single personal allowance for all.
There will be a new, single-tier pension for future pensioners to be set around £140 and based on contributions.
Stamp duty on properties worth more than £2 million will increase to 7% from midnight tonight.
The duty on such properties bought via a company will increase to 15%.
Fuel, cigarettes and alcohol
No fuel duty increases were announced beyond those already planned. Fuel duty is still set to increase by 3.02p per litre from the beginning of August. Car tax will increase at the rate of inflation.
The price of a packet of cigarettes will go up by 37p from 6pm today as duty on all tobacco products is rising by 5%, though duty on alcoholic drinks will not increase.
VAT loopholes on takeaways and drinks but exemptions for food, children’s clothes, books and newspapers will remain.
The Office for Budget Responsibility (OBR) expects the British economy to avoid a technical recession and the forecast for growth is slightly up from the predicted 0.7% to 0.8% in 2012. That is expected to rise to 2% in 2013.
Unemployment is expected to peak this year at 8.7% before falling each year to 6.3% by 2016. The number of people claiming is expected to peak at 1.67 million this year, rather than the predicted 1.8 million, while it is anticipated one million more jobs will be created over five years.
Inflation should fall from 2.8% this year to 1.9% next year.
The borrowing forecast has been revised downwards by £1 billion to £126 billion for 2011/12, then £120 billion in 2012/13, £98 billion in 2013/14, then £75 billion and £52 billion before reaching £21 billion by 2016/17. Total borrowing will be £11 billion less than forecast last autumn.
Which? live coverage of the 2012 Budget
Did you miss Which? Money’s live coverage of George Osborne’s 2012 Budget? You can re-watch all our live Budget commentary and analysis by replaying the Which? Budget 2012 live blog.