Osbourne Announces Pre-Budget 2013 Tax Increases
The Chancellor has put business at the heart of a last-ditch drive to rescue the economy before the next general election, with £5.4bn set aside for roads and schools, a surprise cut in corporation tax, a tenfold increase in the capital investment allowance, and £1.5bn of support for exporters.
George Osbourne has announced reductions to pensions tax relief in the Autumn statement which means that individuals can now only put away £40,000 every year without incurring tax.
However, it the middle class and the wealthy who will shoulder the burden, whilst the poorest of society will become even poorer.
The decision to reduce the annual allowance by a further £10,000 comes only 2 years after the Chancellor cut the allowance from £255,000 to £50,000.
The government have worked out that yesterday’s annual allowance reduction to £40,000 will save the Treasury more than £600m a year.
Osbourne also confirmed the lifetime allowance would be reduced from £1.5m to £1.25m. This means that QNUPS are becoming more attractive for tax efficiency for pensions.
Other highlights include:
- Anyone with a house worth over £1m to get a visit from the tax man
- Britain faces austerity until 2018
- Child benefit cut until 2016
- Poop getting poorer. Unemployment benefit to only rise by 1% per year (less than inflation)
- £3.7bn slashed from welfare
- £10bn in infrastructure projects for roads, schools, railways and housing
- State pension rises by £2.70 to £110.15 per week
- Income tax personal allowance to go up to £9,440 next year, £235 more than previously announced. The rise will be extended to higher rate tax payers.
- Threshold for 40% rate of income tax to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.
- Inheritance tax threshold to rise from £325,000 to £329,000 in 2015/16
- Capital gains tax annual exempt amount to increase by 1% over the same period, reaching £11,100
- 3p rise in fuel duty scrapped, but would rise with inflation in September
- No new tax on property
- Corporation tax will be reduced to 21 per cent by the next election and the investment allowances for businesses will be increased ten-fold
- Tax Avoidance and Evasion Crackdown
More Tax Payers Dragged into the Higher Rate Tax Bracket
By raising the threshold on higher rate taxation by only 1% (less than the inflation rate), it is estimated another 400,000 people will now have to pay the higher rate of taxation and the Treasury will raise £1bn. It will cost a typical higher-rate taxpayer an extra £117 annually according to the Autumn Statement.
Mr Osborne characterised his measures as targeting “bureaucracy, benefits and the better off”. In a Parliamentary statement lasting 45 minutes, the Chancellor warned that the whole country would need to play its part in helping to reduce the country’s record debts.
The Chancellor said that he was attempting to “restore sanity to public finances” and insisted that the economy was improving, albeit at a far slower pace than initially forecast. “It’s a hard road, but we are getting there,” he said. “Britain is on the right track and turning back now would be a disaster.”
Britain Faces More Austerity in the Face of Rising Debt
The Office for Budget Responsibility (OBR) forecasts the economy will grow 1.2% next year, 2% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.
The deficit this year has fallen by a quarter to 6.9% this year. OBR forecasts deficit to come down to 6.1% next year, 5.2% in 2014, 4.2% in 2015, 2.6% in 2016 1.6% in 2017
Debt won’t fall until 2017. Net debt will miss target to fall by 2015/16. It will be 74.7% this year, then 76.8% next year, then 79%, 79.9% in following years, falling to 79.2% in 2016/17 and again to 77.3% in 2017/18.
OBR forecasts government on course to eliminate structural deficit in 5 years’ time.
The full Autumn statement can be found at HMRC’s web site.