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Budget March 2010 - how the Budget affects you

  • Published: Thursday, 25 March 2010

The March 2010 Budget was the final Budget for the last Labour government. George Osborne, Chancellor of the new coalition government, delivered his first Budget on Tuesday 22 June 2010. The new Budget may affect some of the information below. To read about the June Budget, click the orange button.

Tax

Tax changes announced in the Budget include:

  • a two-year Stamp Duty holiday for first-time buyers on residential property transactions up to £250,000
  • a new 5 per cent rate of stamp duty for transactions over £1 million from April 2011
  • a freeze on the threshold for inheritance tax until 2014-15
  • increased penalties for those who don't comply with tax disclosure rules, and the closing of tax loopholes

The 50 per cent rate of income tax will come in next month, but only affects those with earnings over £150,000 a year.

Tax relief on pensions will be restricted from next year, but again only for those with incomes above £130,000 a year.

The government is also ready to sign tax information exchange agreements with Dominica, Grenada and Belize.

There are no further changes to VAT, Income Tax or National Insurance rates.

Measures in this Budget will bring in extra tax worth half a billion pounds each year, while protecting £4 billion worth of revenues by 2012-13.

Alcohol and tobacco

Cider duty rates will increase by 10 per cent above inflation. Other alcohol duty rates will increase by 2 per cent above inflation.

In addition, all alcohol duty rates will increase by 2 per cent above inflation for two further years, until 2014-15.

Tobacco duty rates will increase by 1 per cent above inflation from today, and by 2 per cent above inflation for the next four years.

Housing and property

The government has announced: 

  • the Stamp Duty limit for first-time buyers will be raised from £125,000 to £250,000 for this year and next
  • the Standard Interest Rate applied to the Support for Mortgage Interest scheme will be maintained until December 2010
  • an agreement with Lloyds and Royal Bank of Scotland to lend £95 billion to homebuyers and businesses over the next 12 months
  • a new 5 per cent rate of stamp duty for transactions over £1 million from April 2011
  • the most expensive properties across the country will be excluded from the Housing Benefit calculation in each area, from October next year

Transport and fuel

The government has announced that £100 million will be available to repair local and regional roads damaged by recent bad weather.

A further £285 million investment will be made to improve capacity in the road network.

The fuel duty increase for 2010 will be staged with an increase of 1 pence per litre on 1 April 2010, 1 pence per litre on 1 October 2010, then 0.76 pence per litre on 1 January 2011. Fuel duty will also rise by 1 pence per litre in real terms on 1 April each year from 2011 to 2014.

Benefits and tax credits

The government announced plans to:

  • increase tax credits for families with children aged one and two, from 2012
  • continue additional payments alongside the Winter Fuel Payment next winter, worth £100 to households with someone aged over 80, and £50 to households with someone over female State Pension age
  • make it easier for over-60s to receive Working Tax Credit by reducing to 16 the minimum number of hours they need to work to be eligible
  • maintain the Standard Interest Rate applied to the Support for Mortgage Interest scheme until December 2010
  • introduce a simpler system for working parents who claim the childcare element of the Working Tax Credit for short periods of time, such as during school holidays

Pensions and savings

According to the 2010 Budget:

  • the Saving Gateway will launch in July 2010 - the government will add 50 pence for each £1 saved by working age people on low incomes
  • consumers will be given a new right to a basic bank account
  • from April 2010 the annual ISA limit will be raised from £7,200 to £10,200
  • ISA limits will increase annually with inflation

Employment

The Young Person’s Guarantee will be extended until March 2012.

This means that for the next two years no-one under 24 will need to be unemployed for longer than six months before being offered work or training.

The environment and green issues

A new Green Investment Bank will be created to provide money for low-carbon infrastructure. It will bring together public and private sector capital and operate on a commercial basis.

There is also a commitment to reform the energy market to provide clean, secure and affordable energy in the long-term, with a White Paper by Spring 2011.

The economy

The Chancellor forecast growth of between 3 and 3.5 per cent for 2011. Inflation is expected to come back under 2 per cent by the beginning of 2011. Borrowing is forecast at 11.8 per cent of GDP this year. Public sector net debt will reach 54 per cent of GDP this year.

The government also plans to halve the level of public borrowing as a share of the economy over four years through:

  • reducing growth in public spending
  • tax increases, with the biggest burden falling to those with the highest incomes
  • a return to sustainable economic growth

Public sector and public spending

Borrowing this year should be £11 billion less than forecast at £167 billion. In 2010-11 borrowing will be £163 billion, falling to £131 billion in 2011-12, £110 billion in 2012-13, £89 billion in 2013-14, and reaching £79 billion in 2014-15. This will mean that debt is £100 billion lower than was expected at last year's Budget.

The government will stick to planned levels of overall departmental spending in 2010-11 to help support the economy as it recovers. There is also a pledge to halve the level of public borrowing as a share of the economy over four years.

Measures announced in the Budget include:

  • a new Code of Practice on setting pay for senior public sector workers, following the pay freeze for these workers in 2010-11
  • the government will seek a 1 per cent cap on increases in public sector basic pay for 2011-12 and 2012-13
  • halving spending on consultants, reducing the number of quangos, and using online systems to provide information and advice to the public
  • reforms to the welfare system and reducing social security spending by a further £300 million by 2013-14

Further savings will be made by moving civil servants from expensive London offices to other places around the country. In the long-term, the number of civil servants in London will be reduced by a third. As a first step, 15,000 posts will be relocated within the next five years.

One thousand posts from the Ministry of Justice will be moved out of Central London, saving £41 million.

This is on top of the already identified £5 billion of cuts in specific programmes, announced in December. These will go ahead as planned.

In total, over £20 billion worth of savings have been identified to reduce borrowing and protect front-line services.

HM Treasury

For further information on the Budget from the Treasury, follow the link below.

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Budget Day 2011

Budget 2011 on Directgov

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Full coverage of the new government's first Budget

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