2009 Pre-Budget Report

Overview of the Pre-Budget Report

Tax

The VAT standard rate is to revert to 17.5 per cent as of 1 January 2010.

Employer and employee national insurance contributions to rise by a further 0.5 per cent as from April 2011, although the threshold for NI is to be increased so that nobody earning less than £20,000 will face extra charges.

Employer pension contributions are to be included in the definition of earnings for pension tax relief purposes but will only affect those earning more than £130,000.

From April 2012, the point at which 40 per cent income tax becomes payable is to be frozen for a year.

Increase in small company corporation tax to be deferred, leaving the rate at 21%.

One-off 50 per cent levy on bank bonuses over £25,000.

Individual inheritance tax threshold held at £325,000 for the next year.

New anti-avoidance measures to net £5 billion.

New 50p a month levy on landline phones to pay for improved broadband network.

Business support

Time to pay scheme, which allows individuals and firms to agree extended timetables for settling tax bills to be extended.

Enterprise Finance Guarantee scheme also to be extended for a further 12 months, backing an additional £500 million of loans to businesses.

A corporation tax rate of 10 per cent to be introduced on income generated after April 2013 from UK patents granted after the legislation is approved.

Strategic Investment Fund given extra £200 million to support hi-tech projects.

Empty commercial property relief threshold to be extended to £18,000 covering 70 per cent of empty premises.

Mortgages

Stamp duty holiday to end on 31 December 2009.

Scheme supporting mortgage interest payments for the unemployed to be extended for another six months.

Pensions

The full basic state pension is to rise by £2.40 to £97.65 per week.

Employment

From next month no-one under 24 needs to be unemployed for longer than six months, as opposed to the current 12 months, without training or work.

The minimum number of hours those aged 65 need to work in order to be eligible for tax credits is to be reduced.

Every 16 or 17 year old school leaver to be guaranteed a place in education or training next September.

Special fund to provide financial help for 10,000 undergraduates from poorer backgrounds, enabling them to join internships in industry and the professions.

Environment

A further £200 million to support energy efficiency in 75,000 households.

New scrappage scheme to be introduced to help 125,000 households replace inefficient boilers.

Changes to be made to the climate change levy, company car tax and fuel benefit charge.

Electric cars and vans are to be exempt from company car tax for five years.

100 per cent first year capital allowance for electric vans.

From April, those with home wind turbine or solar panels to receive an average payment of £900 tax-free if they send power back to the national grid.

The economy

The economy will contract by 4.75 per cent this year, returning to growth by the fourth quarter.

The Chancellor predicted that economy will grow by between 1 per cent and 1.5 per cent next year and by 3.5 per cent in 2011/12.

Consumer inflation is set to rise to 3 per cent early next year before falling back to 1.5 per cent by the end of 2010.

Government finances

Government borrowing is forecast to reach £178 billion this year and £176 billion in 2010 before falling further to £140 billion in 2011, to £96 billion in 2013 and to £82 billion in 2014.

Expressed as a share of GDP, borrowing will stand at 12.6 per cent this year, 12 per cent in 2010, then 9.1 per cent, 7.1 per cent, 5.5 per cent in 2013/14 and 4.4 per cent in 2014/15.

The Chancellor predicted that the budget deficit will be halved in four years.

Government spending

Spending growth will slow to an average of 0.8 per cent a year between 2011 and 2015.

Savings of £5 billion will be made on budgets and programmes such as major IT projects.

Government contributions to public service pensions for teachers, councils, NHS and the civil service to be capped by 2012.

All public sector pay deals to be capped at 1 per cent for two years as from 2011, though with special recognition for the armed forces.