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Debbie Annells Managing Director AzureTax Ltd

The British Chamber of Commerce in Hong Kong. UK Emergency Budget Briefing 24 th June 2010. Debbie Annells Managing Director AzureTax Ltd. Budget Report UK Economy. • The economy is predicted to grow by 1.2% this year, 2.3% next year, 2.8% in 2012, 2.9% in 2013 and

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Debbie Annells Managing Director AzureTax Ltd

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  1. The British Chamber of Commerce in Hong Kong UK Emergency Budget Briefing 24th June 2010 Debbie Annells Managing Director AzureTax Ltd

  2. BudgetReport UK Economy • • The economy is predicted to grow by 1.2% this year, 2.3% next year, 2.8% in 2012, 2.9% in 2013 and • 2.7% In both 2014 and in 2015. • • The UK is set to miss the previous government’s “golden rule” – of borrowing only to invest over the economic cycle – in the current Cycle by £485bn. • • Consumer price inflation is expected to reach 2.7% by the end of 2010 before “returning to target in the medium term”. The inflation target remains at 2%, as measured by the Consumer Prices Index. • • Unemployment is forecast to peak this year at 8.1% and then fall for each of the next four years, to reach 6.1% in 2015.

  3. • The structural current deficit “should be in balance” by 2015-16. • The balance of spending cuts vs tax rises would be 77% to 23%. • The measures are forecast to result in public sector net borrowing of £149bn this year, £116bn next year, £89bn in 2012-13 and £60bn in 2013-14. Mr Osborne said by 2014-15 borrowing would reach £37bn, falling to £20bn in 2015-16. Borrowing

  4. • The state now accounted for “almost half” of all national income which was “completely unsustainable”. • Current expenditure would rise from £637bn in 2010-11 to £711bn in 2015-16, Blaming a “rapidly rising bill for debt interest” • This Budget implied further £17bn cuts in departmental spending by 2014/15, unprotected departments face an average real cut of around 25% over four years. Spending

  5. • Compared with the plans set out by Labour, the government would cut additional current expenditure by £30bn a year by 2014-15. • There would be no further reductions in capital spending totals in this Budget but “careful choices” would be made about how it was spent. Projects with “a significant economic return to the country” would be prioritised – assessed in the autumn spending review. Spending

  6. Previous Budget

  7. Previous Budget 2010 – approx GBP11,570 Government spending for every person in the UK

  8. Government Receipts

  9. Government Spending2010-11

  10. The Difference BetweenThe UK’s Spending and IncomeOver the Last 10 Years

  11. • From January 4 2011, the main rate of VAT will rise from 17.5% to 20%. Current zero-rated items like children’s clothes and magazines will remain exempt. (VAT rate in Germany 19%, in France 19.6%) • Personal income tax allowance to be increased by £1,000 in April to £7,475 – worth £170 a year to basic rate taxpayers. • Councils which propose low council tax increases will be offered extra funds to allow them to freeze the tax for one year from April 2011. Taxes

  12. • Capital Gains Tax remains in 18% for low and middle-income savers but from midnight, higher rate taxpayers will pay 28%. • No changes to Inheritance Tax. Taxes

  13. New framework introduced Tax Policy Framework

  14. Income Tax Measures- Previous 50% top tax rate, on earnings over GBP150,000, from 6 April 2010 Allowances phased out from GBP100,000 Bank Payroll Tax Not extended after 5 April 2010

  15. Confirming previous announcements… Salary over GBP180,000 – only basic rate relief Salary over GBP150,000 – relief reduced on a sliding scale In practice those on GBP130,000 or more maybe affected – salary calculated inclusive of employer pension/charity contributions Annual allowance raised to GBP250,000, lifetime allowance to GBP1,800,000 – frozen till 2015/16 Pensions - Previous

  16. 2010/11 £0 - £2,440 10% £2,441 - £37,400 22%* £37,401 - £150,000 40% £150,000 and above 50% 2009/10 £0 - £2,230 10% £2,231 - £34,600 22%* £34,601 and above 40% * Savings tax rate except interest is 20%. Dividends 10% / 32.5%/42.5% UK Income Tax rates(Remain the same)

  17. UK Personal Allowances (£ per year)2010/11 and subsequently2009/10 Personal Allowance (age under 65) 7,475 6,475* Personal Allowance (age 65-74) 9,490 9,490 Personal Allowance (age 75 and over) 9,640 9,940 Married couple’s allowance* (aged less than 75 and born before 6th April 1935) N/A N/A Married couple’s allowance* (age 75 and over) 6,965 6,965 Married couple’s allowance* - minimum amount 2,670 2,670 Aged income limit 22,900 22,900 * Abates by £1 for every £2 of income over £100,000 from 2010/11

  18. Increases to 28% from midnight on 22nd June 2010 • Applies if income is over £43,875 • Split year treatment not clear Capital Gains Tax

  19. • No change this time round, Labour’s plan to increase the duty on cider by 10% above inflation will be scrapped from July. Cigarettes, Alcohol and Fuel

  20. • Child benefit will be frozen for the next three years. • Tax Credits will be reduced for families earning over £40,000 next year. • Health in pregnancy grant to be abolished from April 2011, the Sure Start maternity grant will be restricted to the first child. • Lone parents will be expected to look for work when their youngest child goes to school. Benefits

  21. • From 2011 – except for the state pension and pension credit – benefits, tax credits and public service pensions will rise in line with the Consumer Price Index, rather than the, generally higher, Retail Price Index, saving over £6 billion a year by the end of the Parliament. • New maximum limit of £400 a week will be applied to Housing Benefit, to save £1.8bn a year by the end of the Parliament. • The Government will introduce a medical assessment for Disability Living Allowance from 2013 for new and existing claimants. • The welfare shake-up will save £11bn by 2014/15. Benefits

  22. • Public sector workers face a two-year pay freeze, although 1.7 million of those earning less than £21,000 will get a flat pay-rise worth £250 in both years. Public Sector Pay

  23. The government will accelerate the increase in state pension age to 66. Pensions

  24. • From April 2011, the threshold at which employers start to pay National Insurance will rise by £21 per week, above indexation. • Corporation Tax will be cut next year to 27% and by 1% annually for the next three years, until it reaches 24%. The small companies’ tax rate will be cut to 20%. • Tax relief for the video games industry will be scrapped. Business

  25. • A bank levy will be introduced (0.7%), which will apply to the balance sheets of UK banks and building societies and the UK operations of foreign banks from 1 Jan 2011. But smaller banks will not have to pay. It is expected to raise over £2bn a year. • Banks not yet clear how this will operate. • Affects banks with aggregate liabilities of GBP 20B. • Implemented in France and Germany. Banks

  26. Any Questions?

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