Budget key points
Published ¤ 25/03/2011 09:49:30
Chancellor George Osborne delivered his Budget on Wednesday 24 March. As part of his speech he announced help for first-time buyers and changes to Inheritance Tax.
First-time buyers are given a boost with the launch of a new shared equity scheme called "First Buy Direct". The scheme aims to help 10,000 families onto the property ladder and replaces the Home Buy Direct initiative. The new scheme will see first-time buyers put down a 5 per cent deposit, with the government putting in 10 per cent and the house builder another 10 per cent.
First Buy Direct is only available to first-time buyers who purchase a new-build property and are below a certain income threshold. The chancellor also announced the Government will be extending the Support for Mortgage Interest Scheme which provides borrowers with help towards their mortgage interest payments for another year.
Stamp duty land tax
In a move to strengthen investment into residential property, the government has announced plans to reform the stamp duty land tax rules applied to bulk purchases for residential properties.
A buyer can choose to have the rate of stamp duty on purchases of multiple residential properties determined by the mean value of the dwellings purchased (subject to a minimum rate of 1%) instead of their aggregate value, which is currently the case. This may encourage more professional landlords to build up their portfolios, increasing the supply of private rented houses.
Other stamp duty announcement - the government said it will announce in the autumn the outcome of its review of stamp duty relief for first-time buyers. The current relief, available for properties of £250,000 or less ends next March.
The chancellor said that IHT, currently levied at 40% on estates valued above £325,000, would come down by 10% to 36% if a person donated 10% or more of their estate to charity. Charities will also be allowed to give people gifts worth more to say thank you for donations. At present, gifts such as lifetime membership or free tickets to an event are limited to a value of £500 but this will rise to £2,500.
The tax-free personal allowance for under-65s will increase by £630 to £8,105 in April 2012, cutting individual tax bills by up to £126. There will be an equivalent £630 narrowing of the basic-rate tax band, leaving the threshold at which individuals start paying 40 per cent at £42,475 - the same level as in the upcoming 2011/12 tax year.
Consultation on long-term plan to merge income tax and National Insurance
Direct tax rates to be indexed to Consumer Price Index from 2012
Other taxes and allowances
Council tax to be frozen or reduced this year in every English council
Support for families in the south-west of England with water bills
Tax avoidance clampdown to raise £1bn this year
Supplementary tax on North Sea oil firms to rise from 20% to 32%
Forecast borrowing of £146bn this year, £2.5bn lower than anticipated
Borrowing to fall to £122bn next year, dropping to £29bn by 2015-16
National debt forecast to be 60% of national income this year, rising to 71% in 2012 before falling to 69% by 2015
2011 growth forecast downgraded from 2.1% to 1.7%
2012 forecast also down from 2.6% to 2.5%
Inflation set to remain between 4% and 5% in 2011, falling to 2.5% in 2012
A new single tier pension worth about £140 per week is to be introduced, but no date has been set. This will be based on contributions and be flat-rate - although it won't apply to current pensions.
Enterprise Investment Schemes
Higher earners will have the chance to offset the fall in their maximum pension contributions from £255,000 to £50,000 in April by taking advantage of new tax breaks for investing in small companies. As of next month, upfront income tax relief for private investors will rise from 20 per cent to 30 per cent – bringing the scheme in line with the relief available in contributions into venture capital trusts.
At the same time, the amount any individual can invest through the EIS will double from £500,000 to £1m a year, and the size of company that can qualify for investment will be increased. At present it's limited to companies with gross assets of no more than £7m and fewer than 50 employees.
Please note this is only a summary of the main points of the budget.
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