Budget, Budget, Budget!

I attended a network meeting on Thursday where an accountant delivered a great breakdown of the Budget, Selwyn Foreman of Bradley Forman Accountants kindly shared his speech for our blog.

A 10 minute 2010 budget speech

I’ve got 8 minutes plus questions to explain the new Chancellor’s 60 minutes and make sense of it.
Chancellor George Osborne has delivered his first Budget of the new coalition government – outlining plans to ”balance the books’ by 2016.
He said tough decisions had been ”unavoidable”.
Key tax changes include: a rise in the main rate of VAT from 17.5% to 20% from January 2011; Capital Gains Tax for higher rate taxpayers will go up from midnight to 28%.
Mr Osborne stressed that he wanted to help those on lower incomes. From April 2011 the personal income tax allowance will go up by £1,000 to £7,475.
A major shake up in benefits has also been announced. Tax credits will be reduced for families earning over £40,000 next year; child benefit will be frozen for the next three years. A maximum limit of £400 a week will be introduced on Housing Benefit.
On pensions: From 2011 the Government will accelerate the increase in state pension age to 66.
There were also measures aimed at helping business. Corporation tax will be cut next year to 27% and by 1% annually for the next three years.
The level at which the higher rate of tax starts to apply has been lowered by £1,500 and will now be levied on any income above £42,375, as opposed to £43,875 previously.
Taking into account the £1,000 rise in the personal tax-free allowance, the basic-rate tax band has shrunk by a total of £2,500. This means that £34,900 of a person’s income is now taxed at 20 per cent, as opposed to £37,400 previously. This means the estimated three million existing higher rate taxpayers will also be worse off as a result of the changes, which will take effect from the start of the 2011-2012 tax year.
The new thresholds will be frozen for three years.
There will be a two-year pay freeze for public sector workers earning more than £21,000, although the 1.7 million lowest paid will get a flat £250 pay rise each year. Limits will be put on the salaries of the highest paid public sector workers.
Child tax credits will be withdrawn for families earning more than £40,000 a year, rather than £50,000, while child benefit will be frozen for the next three years.
The baby element of the tax credit – known as Sure Start, which is a one-off payment to help towards the costs of a new baby – will be abolished.
The health in pregnancy grant of £150 will be scrapped from April 2011. The Government said it expected lone parents to look for work when their youngest child goes to school.
The main rate of VAT will rise from 17.5pc to 20pc from January 4 2011. This will generate more than £13bn of extra revenues. Food and children’s clothing will remain exempt.
From midnight, higher-rate taxpayers will see the rate of capital gains tax rise to 28pc from 18pc, while the annual exemption of £10,100 will remain in place. Basic-rate taxpayers will continue to pay CGT at a rate of 18pc.
Housing benefit is to be cut by £1.8bn by the end of this parliament. The measures include benefit being limited to a maximum of £400 per week for a four-bedroom or larger house.
A medical assessment for new and existing claimants will be introduced to ensure that only those who need it can claim it. Three times as many claim as when the benefit was introduced 18 years ago. It costs £11bn a year.
Around 880,000 workers will no longer pay income tax after the Chancellor raised the personal allowance by £1,000 to £7,475 from £6,475. Basic-rate taxpayers will be £170 a year better off as a result. Those earning more than £40,000 will not benefit because they will be hit by a rise in National Insurance contributions, a Labour policy that Mr Osborne has decided to retain.
Investors who are basic-rate taxpayers can breathe a sigh of relief: the Chancellor has watered down his plans to raise capital gains tax to 40pc or even 50pc. Basic-rate taxpayers will continue to pay CGT at 18pc and the annual exemption of £10,100 will remain. Higher-rate taxpayers will pay 28pc. Mr Osborne said the Treasury believed that any greater increase in CGT would have led to a fall in revenues.
There will be no new increases in duties on alcohol, while the proposed 10pc rise in duty on cider will now not be introduced.
Fuel duty is to be frozen.
Anyone who sets up a new business outsideLondon, the South East and the east ofEngland will be exempt from £5,000 of National Insurance contributions for each of the first 10 employees they hire.
Increases to the basic state pension will be in line with earnings from April 2011. Pensions will rise by at least 2.5pc every year.
There will be no rise in tobacco duty.

Budget day is steeped in political tradition and symbolism. Here are some of the quirky and interesting reasons to see more behind the day than perhaps meets the eye:
• Since May 1997, Chancellor’s have delivered two big economic speeches a year. The main Budget in the Spring (usually March or April) and the less significant pre-Budget report in the Autumn (usually November).
• The word ‘budget’ is derived from an old French word ‘bourgette’ which means ‘little bag’.
• The ‘Budget box’, or ‘Gladstone box’ as it is known, in its traditional scarlet leather with satin lining, has been used to carry the Chancellor’s speech to the House of Commons from Number 11 (the Chancellor’s residence on Downing Street) since 1860.
• The tradition was broken by James Callaghan in 1965 and 1966, when he used a brown case bearing the monogram ‘EIIR’.
George Osborne used the old briefcase box for the last time on Tuesday.
• There is only one Chancellor who has failed to deliver his speech. The Tory Chancellor, Tory Iain Macleod, who died soon after his appointment in 1970.
• In a quirky piece of history, Chancellors are allowed to lubricate their vocal chords with alcoholic drinks during the speech; no other member may do this.
• When Norman Lamont was Chancellor in the early 1990s, the famous red briefcase contained a bottle of whisky. The speech was carried separately.
• Chancellors who have drunk alcohol when giving the speech include Winston Churchill, Hugh Dalton and Selwyn Lloyd.
• Gordon Brown opted for Scottish mineral water.
• One of the best Bud
get lines goes to Derick Heathcoat-Amery: “There are three things not worth running for – a bus, a woman or a new economic panacea. If you wait a bit, another one will come along.”
• In 1986, Nigel Lawson’s speech was suspended after the Scottish Nationalists intervened and caused furore in the House of Commons.
• In Chancellor R A Butler’s 1953 Budget, he announced that the sugar ration would be increased from 10oz to 12oz a week so that the nation would have enough to make celebratory cakes for the Queen’s Coronation that year.
• The longest Budget speech was delivered by William Gladstone on 13 April 1853 and lasted four hours and forty five minutes.
• Benjamin Disraeli is said to hold the record for the shortest speech, at 45 minutes in 1867.
Osborne said he would be reducing the small companies’ corporation tax rate by 1% to 20%.
Cider increase to be reversed.
Lloyd George’s voice ran out of steam after the first three-and-a-half hours of his 1909 People’s Budget, arguably the most unpopular budget speech in history. He was allowed 30 minutes to refresh his dulcet Welsh vocal cords. In the first instance this Budget was thrown out by the Lords, after having endured 549 divisions which occupied 90 hours of voting time.

Compiled by
Selwyn Foreman – Bradley Foreman Accountants Limited
07958 127 925
24th June 2010

Selwyn is an accountant of high standing and provides specialist accounting services to the media industry as well as general

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