What a difference a year makes!
Last year the Chancellor, Alistair Darling, delivered his first Pre-Budget report in a tide of optimism today the Chancellor once again addressed the Commons in what has to be the most anticipated pre budget report in history.
Generally the pre budget statement is a chance for the Chancellor to warn individuals and businesses about future tax changes, and to provide time for consultation.
However, it was never going to be a simple as that this year and so after all the speculation about what measures would be adopted to stimulate the economy what did he actually do and how are they going to be paid for?
In case you have not yet been able to catch the main points coming out of the pre budget report we thought we would start to provide the answers to these two questions and summarise them for you.
Economic Measures
· Process for banks to raise equity capital to be made quicker and simpler.
· The Chancellor, in his predictions, admits that we will head into a recession and that next year GDP will fall between 0.75 and 1.25 per cent. However we will pull out of the recession in the second half of 2009 as GDP begins to recover. The prediction is that the country will return to growth of 1.5 per cent and 2 per cent in 2010.
· The prediction is that inflation will continue to fall.
· Government borrowing will reach £78 billion next year and then rise to an unprecedented £118 billion in 2010. This is forecast to then fall to £106 billion in 2011 before returning to balance in 2016.
· £3 billion of additional infrastructure capital spending will be accelerated to stimulate the economy.
· In total the measures announced today represent a £20 billion package of financial steps to stimulate the economy.
Taxation Measures
· VAT to be cut from 1 December 2008 from 17.5% to 15% and will stay at 15% until 31 December 2009. It will be interesting to see how quickly this benefit is passed on to consumers the ultimate payer of VAT.
· Income Tax personal allowance to be increased to £6,475 from 6 April 2009, extending the increases made earlier in the year.
· From April 2011 both Employee and Employer National Insurance Rates will be increased by 0.5%, effectively the same as an increase in income tax.
From April 2011 a new rate of income tax of 45% will be introduced on those earning more than £150,000.
· From April 2010 the full benefit of the income tax personal allowance is to be removed for those earning more than £100,000 and effectively abolished completely for those earning more than £140,000.
· Alcohol, tobacco and fuel duties to be increased to compensate for the reduction in VAT.
· Temporary increase in empty property rates relief for businesses with a rateable value of £15,000 or less.
· Provisions to be put in place to enable businesses in financial difficulties to spread their VAT, Corporation Tax and Income Tax liabilities. It will be very interesting to see how these proposals will be implemented and interpreted by the Inland Revenue.
· The small companies rate of companies tax will not be increased to 22% from April 2009 but will remain at the current rate of 21%. The increase to 22% will now apply from April 2010 instead.
· Companies will be able to carry back losses of up to £50,000 for three years instead of the current one year.
· The chancellor promises £1bn for a temporary Small Business Finance Scheme.
· Air passenger duty will be amended so that those who travel furthest pay most
· The increase in RFL duty for cars previously announced will be deferred and reduced from those previously announced.
· The increases in the Children's Tax Credit that were previously announced that were to apply in 2010 are now to apply from 2009.
· More detailed rules on the new tax relief for businesses buying expensive cars has been provided.
· Further guidance and clarity on what categories of expenditure qualify for Land Remediation Relief have been given.
· Importantly for may family and entrepreneurial businesses the income shifting legislation proposed to counter husband, wives and others sharing income to minimise tax liabilities is to be deferred to at least 2010.
Other Measures
· Mortgage companies will need to wait for at least a three month period after a home owner falls behind with their mortgage repayments before they commence repossession action.
· A new savings gateway scheme to be introduced to encourage those on low incomes save and as part of the scheme the government will pay 50p for each £1 saved.
· Government will force energy companies to reduce gas and electricity bills to mirror any reductions in wholesale prices and are prepared to introduce legislation to do this.
· Banks will be given an extra £4 billion to help small and medium-sized businesses. It will be interesting to see exactly what measures will be introduced.
As ever I am sure there will be more that emerges once we have had time to consider the detail in the more detailed press releases and consultation documents.
However we hope this email has been of interest and should you want to know more then please do not hesitate to contact us. | 
