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Budget 2012: Chancellor George Osborne 'to reward work' Budget 2012: George Osborne cuts 50p top tax rate
(40 minutes later)
George Osborne is delivering his third Budget, beginning it by saying that it was a package "to reward work" and lift "millions of people" out of tax. Chancellor George Osborne has announced that the 50p top rate of income tax will be cut to 45p from April 2013.
The chancellor said growth forecasts for this year had been slightly revised up and borrowing would come in £1bn below forecasts this year. He said the rate, paid on earnings over £150,000, damaged competitiveness and raised a third of the £3bn expected.
He said corporation tax would be cut more than expected, to 24% next month and pledged a "simpler" tax system. Other changes will see the amount people earn before having to pay tax will rise by £1,100 to £9,205.
Tobacco tax will rise by 5% above inflation, adding 37p on 20 cigarettes. 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 chancellor is expected to say that the top 50p rate of tax will be cut and the personal tax allowance raised. The change will mean 750,000 households will not now lose child benefit and only those earning over £60,000 will not get any.
The threshold at which income tax is paid, due to rise to £8,105 next month, could increase to £9,205 in 2013. Delivering his third Budget, he also said tobacco tax would rise by 5% above inflation, adding 37p on 20 cigarettes.
The 50p tax rate on earnings over £150,000 could be cut to 45p in 2013. 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.
Tax cuts are expected to be funded by a clampdown on legal tax avoidance and a new 7% rate of stamp duty on homes over £2m. 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 if he reduces or phases out the top rate of tax, introduced by Labour in 2010, which businesses have complained is anti-entrepreneurial and damaging the UK economy and is opposed by some Conservatives. 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".
Fuel duty
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.
The chancellor has already confirmed that there will be "aggressive" measures against stamp duty avoidance, by people who transfer properties into the ownership of offshore companies, and a more general "anti-avoidance rule" is expected.
Other measures could include reducing tax relief on pension contributions.
The threshold at which anyone pays income tax is set to increase to over £9,000 next year, which would leave the average standard rate taxpayer £305 a year better off. It had already been increased by £1,000 to £7,475 last April and a further £630 increase to £8,105 is due next month.
The coalition is committed to raise it to £10,000 by 2015. It is expected that a change to the higher rate threshold will mean higher earners will not gain from the change.
Mr Osborne is expected to confirm that the 3p rise in fuel duty expected in August will go ahead, despite high pump prices.
Mr Osborne has also been under pressure from some Conservatives to change his policy on child benefit, having announced in 2010 that it would be stopped for families with at least one 40% higher rate tax payer - someone earning more than about £42,000 - from January 2013.
He has said it is important for all sections of society to contribute to cutting the deficit, but has hinted that there may be a change to the way the policy is implemented.
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.