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Budget 2012: Tax allowances set to rise further Budget 2012: Tax allowances set to rise further
(40 minutes later)
The chancellor is expected to announce an increase in the amount people can earn before they start paying tax in his Budget later.The chancellor is expected to announce an increase in the amount people can earn before they start paying tax in his Budget later.
George Osborne is also set to unveil a cut in the top rate of tax from 50p to 45p, but not for a year.George Osborne is also set to unveil a cut in the top rate of tax from 50p to 45p, but not for a year.
The government insists it is not giving a net tax cut to the rich because money will be clawed back by reducing tax avoidance and raising property taxes.The government insists it is not giving a net tax cut to the rich because money will be clawed back by reducing tax avoidance and raising property taxes.
But Labour say the chancellor should be helping ordinary families instead.But Labour say the chancellor should be helping ordinary families instead.
Mr Osborne will unveil his third Budget in the House of Commons at 1230 GMT.Mr Osborne will unveil his third Budget in the House of Commons at 1230 GMT.
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.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.
Ministers lifted the tax threshold by £1,000 to £7,475 in April 2011, meaning the first £7,475 of people's income is not liable for tax.Ministers lifted the tax threshold by £1,000 to £7,475 in April 2011, meaning the first £7,475 of people's income is not liable for tax.
A further £630 increase to £8,105 was due next month and while the coalition has pledged to ultimately raise the threshold to £10,000 by 2015, the Lib Dems have been pushing for "further and faster" action on what is regarded as a flagship policy.A further £630 increase to £8,105 was due next month and while the coalition has pledged to ultimately raise the threshold to £10,000 by 2015, the Lib Dems have been pushing for "further and faster" action on what is regarded as a flagship policy.
Mr Osborne has said he wants to do more to help "working people". Mr Osborne has said he wants to do more to help "working people" - those not paying tax at all will not benefit from the change.
Business Secretary Vince Cable said: "The Liberal Democrats have pushed very hard to lift low earners out of tax and help hard pressed middle income families and that's our priority, but the Budget has to be judged against the extent to which it contributes to Britain's recovery from this dreadful economic crisis into which we've been plunged."Business Secretary Vince Cable said: "The Liberal Democrats have pushed very hard to lift low earners out of tax and help hard pressed middle income families and that's our priority, but the Budget has to be judged against the extent to which it contributes to Britain's recovery from this dreadful economic crisis into which we've been plunged."
It is unclear how the measure will be paid for, when it will come into force, although it is expected that a change to the higher rate threshold will mean higher earners will not gain from the change. It is unclear how the measure will be paid for or when it will come into force, although it is expected that a change to the higher rate threshold will mean higher earners will not gain from the change.
Economists have said raising the threshold would cost billions. Those not paying tax at all will not benefit from the change. Some had predicted that government borrowing over the last year could come in lower than previously envisaged - giving Mr Osborne some additional room for manoeuvre.
However, ahead of the Budget, official figures from the Office for National Statistics revealed a rise in borrowing in February to £15.2bn - up from £8.8 billion for the same month in 2011.
The Treasury said that would bring the overall total for 2011-12 closer to the forecast of £127bn.
'On another planet''On another planet'
Mr Osborne is also likely to announce that the 50p top rate of tax - levied on incomes above £150,000 - will be reduced to 45p. In his Commons speech, Mr Osborne is also likely to announce that the 50p top rate of tax - levied on incomes above £150,000 - will be reduced to 45p.
The rate - which was introduced in April 2010 in what Labour said at the time was a temporary move - has been criticised by the business community and many Conservative MPs who say it deters enterprise and investment.The rate - which was introduced in April 2010 in what Labour said at the time was a temporary move - has been criticised by the business community and many Conservative MPs who say it deters enterprise and investment.
Some Lib Dems, however, want it to be retained.Some Lib Dems, however, want it to be retained.
The chancellor is expected to base any decision on the findings of a review by HM Revenue and Customs review into how much the 50p tax raised last year.The chancellor is expected to base any decision on the findings of a review by HM Revenue and Customs review into how much the 50p tax raised last year.
Conservative deputy chairman Michael Fallon told the BBC: "There's a lot of evidence... that people are avoiding it and it was, in the end, the third highest tax rate on the planet if you add the National Insurance at 2%.Conservative deputy chairman Michael Fallon told the BBC: "There's a lot of evidence... that people are avoiding it and it was, in the end, the third highest tax rate on the planet if you add the National Insurance at 2%.
"It was distortive and that's something that needed to be corrected.""It was distortive and that's something that needed to be corrected."
But Labour have attacked the move, with shadow Treasury minister Owen Smith saying: "You'd need to be on another planet to think you can have a Budget where we're going to cut taxes for the richest 1% in this country and then plausibly describe that as fair.But Labour have attacked the move, with shadow Treasury minister Owen Smith saying: "You'd need to be on another planet to think you can have a Budget where we're going to cut taxes for the richest 1% in this country and then plausibly describe that as fair.
"We think it is absolutely an extraordinary decision being taken at a point when ordinary families... with high inflation, low wages, massive cuts already to tax credits... when those families are feeling the squeeze.""We think it is absolutely an extraordinary decision being taken at a point when ordinary families... with high inflation, low wages, massive cuts already to tax credits... when those families are feeling the squeeze."
The opposition want a cut in the headline rate of VAT and a one-off bank bonus tax to help get the young unemployed into work and to build more affordable homes.The opposition want a cut in the headline rate of VAT and a one-off bank bonus tax to help get the young unemployed into work and to build more affordable homes.
Child benefitChild benefit
The cut in the top rate is expected to be offset with a range of steps to clamp down on tax avoidance, estimated to cost the Treasury about £5bn a year.The cut in the top rate is expected to be offset with a range of steps to clamp down on tax avoidance, estimated to cost the Treasury about £5bn a year.
A new higher rate of stamp duty for properties worth more than £2 million is expected, and measures will be imposed to prevent people avoiding the tax altogether by buying homes through offshore companies.A new higher rate of stamp duty for properties worth more than £2 million is expected, and measures will be imposed to prevent people avoiding the tax altogether by buying homes through offshore companies.
The Lib Dems have also floated the idea of a "tycoon tax" in which the wealthiest people pay a minimum rate of tax on all their earnings by capping allowances and reliefs open to them.The Lib Dems have also floated the idea of a "tycoon tax" in which the wealthiest people pay a minimum rate of tax on all their earnings by capping allowances and reliefs open to them.
Other speculation in the run-up to the Budget has centred around possible revisions to child benefit changes due in January.Other speculation in the run-up to the Budget has centred around possible revisions to child benefit changes due in January.
The benefit was due to be removed from any household with a higher rate taxpayer - someone earning more than about £42,000 - but senior ministers have indicated in recent months they are looking at how to address perceived anomalies in the plans.The benefit was due to be removed from any household with a higher rate taxpayer - someone earning more than about £42,000 - but senior ministers have indicated in recent months they are looking at how to address perceived anomalies in the plans.
One of the most controversial aspects is the fact that a household with just one earner who is a higher rate taxpayer would lose child benefit, while a family with two earners each just under that limit would keep it.One of the most controversial aspects is the fact that a household with just one earner who is a higher rate taxpayer would lose child benefit, while a family with two earners each just under that limit would keep it.
It has also been reported that Mr Osborne could announce the end of national pay rates for some public sector workers while measures to encourage investment in infrastructure and to reduce business red tape are also thought likely.It has also been reported that Mr Osborne could announce the end of national pay rates for some public sector workers while measures to encourage investment in infrastructure and to reduce business red tape are also thought likely.
The chancellor will use Wednesday's speech to update MPs on the latest forecasts for the UK's struggling economy.The chancellor will use Wednesday's speech to update MPs on the latest forecasts for the UK's struggling economy.
In November, the independent Office for Budget Responsibility revised down the rate at which UK economy is expected to grow in 2012 to 0.7%.In November, the independent Office for Budget Responsibility revised down the rate at which UK economy is expected to grow in 2012 to 0.7%.
The economy contracted in the final three months of 2011 and Labour have called for the chancellor to focus on tackling rising unemployment amid fears of a double-dip recession.The economy contracted in the final three months of 2011 and Labour have called for the chancellor to focus on tackling rising unemployment amid fears of a double-dip recession.
Economists say government borrowing over the last year could be between £3bn and £10bn lower than previously envisaged, giving Mr Osborne some additional room for manoeuvre.
But the chancellor has said he remains firmly committed to austerity measures he says are needed to meet his deficit reduction targets by 2016-7 and crucial to maintaining market confidence in the UK economy.But the chancellor has said he remains firmly committed to austerity measures he says are needed to meet his deficit reduction targets by 2016-7 and crucial to maintaining market confidence in the UK economy.
Will you be affected by the tax changes? Send us your comments and experiences using the form below.Will you be affected by the tax changes? Send us your comments and experiences using the form below.