Tax cuts to boost economy
If a week is a long time in politics,
the eight-month gap between last March's Budget and the November Pre-Budget
Report seems an eternity.
When Alistair Darling presented his first Budget on 12
March 2008, the FTSE 100 Index was at 5,690, the base rate was 5.25% and annual
Consumer Price Inflation was 2.5%, comfortably within the Bank of England's
target range. Back then, the Chancellor predicted that net government borrowing
would peak at £43bn in 2008/09. This allowed the Treasury to just remain
within the ˜sustainable investment rule" that borrowing should never
exceed 40% of GDP.
Today's picture is very different, thanks mainly to
the financial turmoil that has engulfed the global economy since last spring.
The Chancellor now expects borrowing to reach £77.6bn this year and
£118bn in 2009, before falling gradually to £54bn in 2013. By then,
total net government borrowing will have climbed to £1,084bn.
The scale of the borrowings reflects both Mr Darling's
fiscal stimulus, worth £20bn between now and April 2010, and also the
recession-induced drop in tax revenues. The measures announced in the
Pre-Budget Report are thus a mix of short term tax reductions and longer term
tax increases. The main tax proposals include the following:
- The standard rate of VAT will fall to 15% for 13
months from 1 December 2008.
- The planned increase in the small companies
corporation tax rate will be deferred for one year.
- There will be a temporary extension of the ability
of companies and unincorporated businesses to carry back their trading losses
against the profits of earlier years.
- A temporary exemption from business rates will be
available for certain empty properties.
- From 2011/12, the top rate of income tax will be
45% for taxable income over £150,000. Those with gross income of over
£100,000 will see their personal allowance reduced or removed completely.
- From the same tax year, all the main national
insurance contribution rates will rise by 0.5%.
Useful links
Below are the details of websites where you can find
further information:
http://www.hm-treasury.gov.uk/prebud_pbr08_index.htm
http://www.hmrc.gov.uk/pbr2008 |
