In his Budget today, the Chancellor George Osborne made a number of surprise announcements affecting personal finances.
Aiming to be “fiscally neutral” in this budget George Osborne intends to neither increase net taxation or reduce it over the next twelve months.
The Chancellor also confirmed that inflation is expected to between 4% and 5% this year, but is predicted to fall to 2.5% next year with further falls to 2% in two years.
He also announced that growth across the economy will be lower than the expected 2.1% falling to 1.7% which shows that the economy is slowing down.
There was welcome news for motorists who have been struggling with sharply rising fuel costs over the last few months.
A 1 penny per litre cut in fuel duty will apply from 6pm tonight, abolishing the 2009 Budget fuel duty escalator and replacing it with a fair fuel stabiliser that increases tax on North Sea oil production when oil prices are high.
Alcohol duties remains the same, however tobacco tax will increase by a further 2%.
The chancellor also increased the tax threshold at which people start to pay tax by £630, which will save around £45 per year, however this will apply from April 2012.
Some tax allowances will now be indexed to the CPI (Consumer Price Index) rather than the RPI (Retail Price Index) which may sound like a technical measure, however as the CPI inflation figure is smaller than the RPI value, this will actually result in many hidden tax increases.
Tax avoidance schemes came under the Chancellor’s microscope. He has closed down three ways of avoiding stamp duty and announced other measures that will raise an additional £1bn per year.
First time buyers are to be offered interest-free loans. This £250 million scheme will be funded by a levy on banks and it will provided for up to 10,000 people to receive loans of up to 20% of the value of the property they are buying, subject to it being a new build property and less than £60,000 is earned by the household. The loans will be interest free for 5 years and then fixed at an interest rate set below market levels.
On the travel front, an air passenger duty rise has been postoned for a year.