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Chancellor presents ‘a Budget for growth’

Chancellor George Osborne heralded his second Budget as one ‘for enduring growth and jobs’. Despite downgrading the economic growth forecast for 2011 from 2.1% to 1.7%, the Chancellor insisted that the Government’s fiscal plans were on course.

The Chancellor’s speech included a range of measures intended to bolster business enterprise. Among the key announcements was an increase in the planned reduction in corporation tax, with rates falling by 2% from April 2011, and 1% in each of the following three years, to reach 23%, accompanied by an adjustment in the bank levy to ensure that banks do not pay less tax as a result. The scrapping of business regulations to the tune of £350 million, and a three-year moratorium on new regulations for firms with fewer than 10 staff were also confirmed, and the business rate relief ‘holiday’ for small businesses will be extended for another year. Sweeping changes to the Enterprise Investment Scheme were also announced, alongside a doubling of Entrepreneurs’ Relief, which rises to £10 million from 6 April. The small companies research & development tax deduction will also rise to 200% in April, and to 225% next year.

The Chancellor acknowledged that the cost of living and the high price of oil pose a problem for many British families. While a postponing of the planned rise in fuel duty had been anticipated, the Chancellor went a step further by cutting the duty by 1 pence a litre, and introducing a Fair Fuel Stabiliser, measures which will be paid for by additional taxes on North Sea oil firms. In addition to the planned increase in the income tax personal allowance, another future rise will take the allowance to £8,105, in April 2012. Meanwhile, first-time buyers will be offered further help to purchase new property by means of a proposed shared equity scheme, and help for those with mortgage arrears will be extended. Also of interest was the announcement of a 10% inheritance tax discount for taxpayers who leave at least 10% of their estate to charity, and a simplification of the Gift Aid scheme.

The Chancellor stated his intention to make the UK the ‘most competitive tax regime in the G20’, but outlined plans to abolish 43 tax reliefs. Meanwhile, a £1 billion crackdown on tax avoidance was confirmed, alongside the introduction of a £50,000 tax for some non-domiciles. Tobacco duty rises by 2% above inflation. While air passenger duty rates have been frozen, users of private jets will be subject to passenger duty for the first time.

Also of note for the future were plans to consult on a merger of the income tax and national insurance regimes, proposals to review the effect of the ‘temporary’ 50% tax rate, and the long-term creation of a flat-rate state pension worth around £140 a week.