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Budget 2012: George Osborne cuts 50p top tax rate | |
(40 minutes later) | |
Chancellor George Osborne has announced that the 50p top rate of income tax will be cut to 45p from April 2013. | |
He said the rate, paid on earnings over £150,000, damaged competitiveness and raised a third of the £3bn expected. | |
Other changes will see the amount people earn before having to pay tax will rise by £1,100 to £9,205. | |
Child benefit will also now be removed gradually for those earning more than £50,000. He had planned to axe it where one parent earned over £43,000. | |
The change will mean 750,000 households will not now lose child benefit and only those earning over £60,000 will not get any. | |
Delivering his third Budget, he also said tobacco tax would rise by 5% above inflation, adding 37p on 20 cigarettes. | |
Mr Osborne defended the politically risky decision to cut the top rate of tax by saying five times as much would be raised from the wealthiest by other tax and anti-avoidance measures being brought in. | |
He said a new "anti avoidance" tax rule would be introduced - to deal with the "morally repugnant" practice of people not paying the tax that they should. | |
People who bought expensive homes using offshore companies would also face a new 15% stamp duty charge and a new 7% rate will be imposed on homes over £2m. | |
Mr Osborne also announced caps on currently uncapped tax reliefs. | |
In his last big financial update - the Autumn Statement in November - the chancellor lowered growth forecasts for the UK economy and extended the period of spending cuts by a year to 2016-17. | In his last big financial update - the Autumn Statement in November - the chancellor lowered growth forecasts for the UK economy and extended the period of spending cuts by a year to 2016-17. |
But he was able to nudge up the growth forecast for 2012 - which had been revised down from 2.5% to 0.7% - to 0.8%. | But he was able to nudge up the growth forecast for 2012 - which had been revised down from 2.5% to 0.7% - to 0.8%. |
He said he was "on course" to eliminate the structural deficit by 2016/7. | He said he was "on course" to eliminate the structural deficit by 2016/7. |
He also said the Independent Office for Budget Responsibility expected the UK would avoid a "technical recession" - but that the eurozone crisis and a spike in oil prices continued to pose risks. | He also said the Independent Office for Budget Responsibility expected the UK would avoid a "technical recession" - but that the eurozone crisis and a spike in oil prices continued to pose risks. |
At the start of his speech, Mr Osborne said the OBR forecast that unemployment would peak this year at 8.7% before falling, and said the number of people claiming benefits had been revised down by 100,000 a year over the next four years. | At the start of his speech, Mr Osborne said the OBR forecast that unemployment would peak this year at 8.7% before falling, and said the number of people claiming benefits had been revised down by 100,000 a year over the next four years. |
He said the deficit was falling, borrowing was falling and would be £11bn less than forecast last autumn by 2016/7. | He said the deficit was falling, borrowing was falling and would be £11bn less than forecast last autumn by 2016/7. |
But Mr Osborne said the Budget would be "fiscally neutral" with "no deficit-funded giveaways". | But Mr Osborne said the Budget would be "fiscally neutral" with "no deficit-funded giveaways". |
In other announcements, he said the state pension age would be automatically reviewed, to ensure it kept pace with changing life expectancy. | In other announcements, he said the state pension age would be automatically reviewed, to ensure it kept pace with changing life expectancy. |
More help for the armed forces was announced - with £100m improvements to accommodation and council tax relief for those serving overseas. | More help for the armed forces was announced - with £100m improvements to accommodation and council tax relief for those serving overseas. |
And he said the UK must "confront" the lack of airport capacity in the south east - and more would be announced this summer. The government scrapped plans for a third runway at Heathrow. | And he said the UK must "confront" the lack of airport capacity in the south east - and more would be announced this summer. The government scrapped plans for a third runway at Heathrow. |
The chancellor said he wanted the UK to become Europe's technology centre and announced plans to help keep video games and the animation industry in the UK. | The chancellor said he wanted the UK to become Europe's technology centre and announced plans to help keep video games and the animation industry in the UK. |
There has been widespread speculation about the content of the Budget - which Mr Osborne has said will be a "coalition Budget", agreed between the two governing parties. | There has been widespread speculation about the content of the Budget - which Mr Osborne has said will be a "coalition Budget", agreed between the two governing parties. |
He risks a political backlash over the 50p rate, introduced by Labour in 2010, which businesses have complained is anti-entrepreneurial and damaging the UK economy and is opposed by some Conservatives. | |
Labour has said that to prioritise tax cuts for the wealthiest at a time of austerity shows the government is "out of touch". | Labour has said that to prioritise tax cuts for the wealthiest at a time of austerity shows the government is "out of touch". |
It is thought the Liberal Democrats, who had warned against cutting the top 50p rate of tax too soon, have demanded other measures to tax the rich. | It is thought the Liberal Democrats, who had warned against cutting the top 50p rate of tax too soon, have demanded other measures to tax the rich. |
What is your reaction to the Budget? Do you have any questions? Paul Lewis from Radio 4's Money Box will answer a selection of your questions on BBC Two and the BBC News Channel. You can send us your comments and questions using the form below. | What is your reaction to the Budget? Do you have any questions? Paul Lewis from Radio 4's Money Box will answer a selection of your questions on BBC Two and the BBC News Channel. You can send us your comments and questions using the form below. |