Where were you squeezed? Emergency Budget, June 2010

We all knew that it was not going to be pretty, but George Osborne certainly seems to have ‘grasped the nettle’ of controlling the UK’s debt and fiscal policy. Time will tell if it is successful in hitting its fiscal targets.

The headline changes are likely to be:

* The increase in VAT from 17.5% to 20% from January next year. This could also have an effect on inflation.

* It should also be noted that Capital Gains Tax (CGT) allowance of £10,100 will remain in place which is good news. Above this, the flat rate of CGT will increase from 18% to 28% for higher earners from midnight tonight (staying the same for basic rate tax payers) , which falls more in line with its former levels and in line with the levels applicable in Europe.

* It is also good to see the tax free personal allowance will increase by £1,000 to £7,475 from April next year. The target is still to increase this level to £10,000 per annum.

* For business, many directors and business owners being pleased to see corporation tax rates being reduced over the next 4 years, by 1% per annum.

As ever, I am sure the devil will be in the detail and there are many other areas, such as:

* A pay freeze for Public Sector employees (earning over £21,000 per annum)

* Increase in Bank Levy’s

* Capital allowance changes for business/ Extention of 10% entrepreneurs releif to £5M from £2M

* Green Investment Banks

* Up rating of benefits from RPI to CPI (a fall of around 1% per annum based on past years)

* Child Benefit frozen for 3 years

* No plan to join the Euro in this parliament

This is the first of the new coalition Governments budgets and it will be interesting how well their fiscal policy will control the problems of the UK economy. It will also be interesting to see how the markets and credit agencies respond, which based on initial reactions seems to be positive. Time will tell if this is maintained.

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