Budget 2011: Winners and losers

Chancellor George Osborne has unveiled the 2011 Budget - but how will the changes affect you?

This was never going to be an easy Budget for Chancellor George Osborne. Inflation is at its highest level for 20 years and if the latest growth figures are anything to go by, the ‘green shoots of recovery’ are still not really sprouting.

It’s no surprise therefore that the Chancellor branded this package the ‘Budget for growth’.

But how will these changes really affect you? Let’s take a look at the winners and losers from today’s budget...

Winners

• Basic and lower rate tax-payers

Every person earning less than £115,000 per year will benefit from income tax cuts planned to come into force from April 2012. The amount the low paid can earn before they are taxed will increase by £630 to £8,105, saving 25 million people an average of £48 a year.

While higher rate tax payers will not benefit from this cut, the threshold for those in the upper tax bracket will not be lowered to fund the move.

The change comes on top of the increase in personal allowance to £7,475 announced in the last Budget and due to come in next month.

• First-time buyers

10,000 first-time buyers struggling to save for their new home will be given a helping hand with a £250m shared-equity scheme. The idea is that the government, home builder and buyer will all put up part of the deposit for a new-build property – allowing the first-time buyer to take out a lower mortgage at a lower loan-to-value.

• Motorists

Fuel duty has been cut by one penny a litre from 6pm tonight and the planned four penny per litre rise has been delayed by a year, as has the planned 2012 rise. The fuel escalator that increased fuel prices in line with inflation has been scrapped and replaced by a ‘fair fuel stabiliser’. This stabiliser will force oil companies to pay tax when oil prices are high to fill the gap left by the fuel duty cut.

£100 million will also be put aside to help councils repair potholes on the nation’s roads.

• Air passengers

The planned rise in Air Passenger Duty – the tax on air travel – will be delayed until next year and the flight distance bands that are used to set the duty by will also be reviewed.

• Residents of South-West England

High water rates in South-West England will be reduced using public money.

• Charities

The process of claiming back tax relief on charitable donations will be simplified by 2013 and the requirement to fill out a form in order for a charity to claim Gift Aid will also be scrapped. The amount that a donor can receive in benefits (e.g. free tickets and viewings to museums and theatres) before losing tax relief on their donations will be increased as well - from £500 to £2,500.

In addition to this, a new policy to encourage giving will allow anyone who donates 10% or more of their estate to charity in their will to claim a 10% cut in their inheritance tax bill.

• Businesses

21 new ‘enterprise zones’ will be set up in some of Britain’s most deprived areas. The government has allocated £100m for the new zones which will include tax breaks for businesses, relaxed planning laws, discount business rates and super-fast broadband.

New businesses and companies with fewer than 10 employees will be exempt from any new business regulation for three years from April 1st 2011 and planning bodies will have to prioritize jobs and growth when considering an application.

Corporation tax (the tax levied on company profits) has also been cut by 2% from April, 1% more than was previously planned, and will be annually reduced by a further 1% over the next three years.

• Apprentices and trainees

50,000 new apprenticeships will be funded with a £180m package to help tackle youth unemployment over the next four years. 80,000 further work experience places will also be funded, with this figure rising to 100,000 in total over the next two years.

In addition to these schemes, 24 new university technical colleges will be built offering practical skill in engineering and other vocations.

• The environment

£2 billion of extra funds will be allocated to the Green Investment Bank (making £3bn in total) allowing it to open a year earlier in 2012 and support low-carbon business.

A ‘Carbon Price Floor’ on electricity generation will also be introduced from April 2013 that will levy a charge on every ton of Carbon Dioxide produced.

Losers

• Smokers

Tobacco duty will increase by 2% and the difference in prices between cheaper products (such as rolling tobacco) and more expensive cigarettes will be addressed.

• Banks

Banks will not be able to benefit from the decrease in corporation tax as the bank levy will increase from next year to offset the tax cut.

• Non-doms

The annual £30,000 charge paid by non-domiciled residents will be increased to £50,000 for those who have been UK residents for 12 years or more. The £30,000 charge will be retained for those who have been resident for at least seven years but less than 12 years.

But it’s not all bad news for non-doms; to encourage investment in the economy the tax levied when a non-domiciled resident uses foreign income to invest in a UK business will be scrapped.

• Private jet owners

The so-called ‘Learjet levy’ will see owners of private jets become subject to Air Passenger Duty. The move is expected to cost executive flyers tens of millions of pounds every year.

• Tax avoiders

The government have today published a paper outlining ways to tackle types of tax avoidance including interest-free loans that are never paid back and several Stamp Duty tax relief loopholes.

And...

The Chancellor has also announced that the government will begin consultations on the merging of National Insurance and Income Tax and will continue to push towards a simplification of the State Pension towards a £140 a week standard payment.

What do you think?

Will this Budget affect you? Has the Chancellor done enough? What policies should he have introduced?

Let us know your thoughts in the comment box below.

More: 15 top cash ISAs for transfers | The ten best ways to recession-proof your job