Pre-Budget Report 2008 - plans to cut VAT

25 Nov '08

3 min read

Speaking in the House of Commons, the Chancellor has set out his actions for supporting people through the difficult times of the current global financial crisis.

Tax changes
- The £600 increase in the income tax personal allowance announced in May 2008 will become permanent with a further increase of £130, meaning basic rate taxpayers pay £145 less tax a year in 2009-10
- Employee, employer and self-employed rates of National Insurance Contributions will increase by 0.5 per cent from April 2011
-The income tax personal allowance will be restricted to half its value for those with incomes over £100,000 from April 2010 and a new higher rate of income tax of 45% will be introduced for incomes above £150,000.

VAT
The Value Added Tax (VAT) rate will be temporarily reduced to 15 per cent from 1 December 2008 until 31 December 2009.

Pre-Budget Report 2008 - VAT reduction

Benefits and tax credits
To provide additional support for low- and middle-income taxpayers, the government will:
- April's increase in Child Benefit will be brought to January. This is worth an additional £22 on average to families. The commitment to increase the child element of the Child Tax Credit by £25 above indexation in April 2010 will also be brought forward to April 2009
- All pensioners will; be paid £60 in the New Year, the equivalent of bringing forward the April increase in the Basic State Pension for a single pensioner to January.
- The Prime Ministers announcement to legislate on the commitment to eradicate child poverty by 2020 will be taken forward through a child poverty bill in 2009
- The government is committed to uprating the basic State Pension by RPI or 2.5%, whichever is higher. In April 2009 the level of a full State Pension will rise in line with prices to £95.25 a week
- An above-indexation increase in Pension Credit's minimum income guarantee to £130.00 for single pensioners and £198.45 for couples in 2009-10.

Green measures
- Introducing a green stimulus – accelerating £535 million of capital spending on energy efficiency, rail transport, and adaptation measures
- Including aviation in the EU Emissions Trading Scheme from 2012
- The postponed two pence per litre fuel increase will go ahead on 1 December 2008.
- Installing 600,000 insulation measures this winter, up to 70 per cent on last winter
- Reforming air passenger duty from 1 November 2009,

Public spending
As part of the government's fiscal stimulus package, £3bn of capital spending will be brought forward from 2010-11 into 2009-10 and 2008-09

The government will increase its Value for Money target in 2010-11 by £5 billion

Current spending will grow on average from 2011-12 to 2013-14 at 1.2 per cent a year inreal terms, and public sector net investment will move to 1.8 per cent of GDP by 2013-14.

Government UK

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