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Budget 2012: George Osborne cuts 50p top tax rate 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. George Osborne has announced cuts to the top rate of income tax - and an increase in the amount of money people can earn before they start paying tax.
He said the rate, paid on earnings over £150,000, damaged competitiveness and raised a third of the £3bn expected. The chancellor said the 50p rate was uncompetitive, raised "next to nothing" and would fall to 45p next year.
Other changes will see the amount people earn before having to pay tax will rise by £1,100 to £9,205. The personal tax allowance will rise to £9,205 for millions of working people while child benefit cuts will be phased in for those on more than £50,000.
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. Labour's Ed Miliband said millionaires would get a "massive income tax cut".
The change will mean 750,000 households will not now lose child benefit and only those earning over £60,000 will not get any. He said Mr Osborne had spoken for an hour but: "There was one thing he didn't say: today marks the end of 'we are all in it together'."
Delivering his third Budget, he also said tobacco tax would rise by 5% above inflation, adding 37p on 20 cigarettes. Delivering his third Budget, Mr Osborne also said tobacco tax would rise by 5% above inflation, adding 37p on 20 cigarettes. The scheduled 3p rise in fuel duty in August will go ahead.
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 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. He said a report into the highest rate introduced by Labour in 2010, had found it had caused "massive distortions" - and had raised just a third of the £3bn expected.
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. "No chancellor can justify a tax rate that damages our economy and raises next to nothing," he said.
Mr Osborne also announced caps on currently uncapped tax reliefs. Stamp duty changes
The threshold at which income tax is paid had been due to rise to £8,105 next month and will now increase to £9,205 in 2013.
Mr Osborne said it would benefit "every working person on low or middle incomes" and amounted to an extra £170 a year after inflation.
A new 7% rate of stamp duty would be charged on properties worth more than £2m - and anyone trying to buy a £2m home through an offshore company would face a punitive 15% tax rate.
Child benefit had been due to be removed from all families with at least one parent paying the higher, 40% rate, of income tax - about £43,000 - from January 2013.
But Mr Osborne said he wanted to avoid a "cliff edge" effect - so it would now only be withdrawn when someone in a household earned more than £50,000, at a rate of 1% of the benefit for every £100 up until £60,000, when it would be cut entirely. It meant 750,000 more households would not now lose all their child benefit.
Corporation tax
He said corporation tax would be cut more than expected from next month, by one percentage point to 24%, falling to 22% by 2014, something he said would be "an advertisement for investment and jobs in Britain".
Mr Osborne also announced caps on currently uncapped tax reliefs and said he would get rid of age-related allowances, introducing a new single personal allowance for all.
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% and 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.
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".
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 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. But Labour Leader Ed Miliband labelled it a "millionaire's budget".
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. "Tax credits cut, child benefit taken away, fuel duty rising - and what has he chosen to make his priorities?
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. "For Britain's millionaires, a massive income tax cut each and every year."
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.
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.