2008 Pre Budget Report

Against the background of the Credit Crunch which led to the 'financial crisis' and with the prospect of deflation and the official declaration of being in recession this Pre Budget Report attracted considerable interest. Widely leaked measures were combined with a raft of measures intended to take a pro active approach designed to stave off the deeper effects of the pending recession.

With tax cuts and increased government spending leading to an inevitable increase in national debt, even the government's own forecasts do not expect to see any significant reversal in national debt for seven years. Only time will tell the effect of these changes. Our 2008 Pre Budget Report includes a comprehensive summary of Alistair Darling's announcements. Please review our report and contact us with any areas of interest or concern.

Looking for the detail?

The announcements are included in the Press Releases which can be found on HM Revenue Customs website.

2008 Pre Budget Report highlights

• VAT is to be cut as from 1 December to 15 percent until the end of 2009, but duties on petrol, alcohol and tobacco to rise to offset the reduction
• Increase in personal allowance of £610 to be made permanant. Personal allowance for next year to be £6,475. Restrictions apply for high earners from 2010/11
• National insurance to rise by 0.5 percent on all rates of national insurance as from 2011
• Top rate of income tax to increase to 45 percent on earnings above £150,000 as from 2011
• Air passenger duty to involve higher charges for longer flights
• New car tax fuel efficiency bands still to be introduced but at a more gradual pace, with a top increase next year of £5
• Consultation on the wording of a taxpayers' charter to begin in January

Business:

• Rise in small company corporation tax from 21 percent to 22 percent to be deferred for one year
• Businesses to be allowed to spread tax payments over longer periods of time
• No legislation to be introduced on income shifting in the 2009 Finance Bill, but the issue is to be kept under review
• £1 billion to be set aside to help small business borrowing by means of a temporary small business lending scheme
• £1 billion to help exporters through the export credit guarantee department
• Rise in the threshold on duty payable on empty business premises
• Watchdog to monitor bank business lending
• Introduction of a three year carry back for trading losses for one year, capped at £50,000

Mortgages:

• Lenders to wait three months in the case of defaulted payments before pursuing repossession
• Ceiling at which homeowners who lose their jobs can apply for help with mortgage payments to rise to mortgages worth £200,000

Families:

• Increase in child benefit to come into effect in January instead of April 2009
• Pensioners to get above-inflation increases, up from £124 to £130 a week for individuals and up from £189 to £198 a week for couples.

Government spending

• £3 billion of capital expenditure scheduled for 2010/11 to be brought forward to this year; funds are to be spent on roads, schools, social housing and new energy measures

Government borrowing

• Public borrowing set to climb to £78 billion this year and £118 billion next year, and to fall back to £54 billion by 2014
• Debt as a proportion of GDP to reach 57 percent by 2013/14
• Policy of borrowing only to invest over the economic cycle will not be re-introduced until 2015/16

Growth

• Forecast for 2009 puts UK economic contraction at between -0.75 percent and -1.25 percent
• Forecast for 2010 puts UK economic growth at between 1.5 percent and 2 percent