Pre Budget Report 2009
Looking for the pot of gold at the end of the recession
When you are in a hole, the saying goes, you should stop digging. For the Chancellor of the Exchequer, there is no choice - he has to make a Pre-Budget Report at the end of the year to outline what he intends to put in his Budget in the Spring. This year many people are predicting that the country's finances will not be Alistair Darling's responsibility for much longer, but he still has to tell us what he will do if we give his party another five years.
He had a very difficult balance to strike between the demands of politics - not wanting to scare the voters too much - and economics - trying to convince the world's markets that the UK's finances would be restored to health in the foreseeable future. He has announced a number of significant measures, but many people are still wondering whether there is enough here to fill the deficit: there is surely more pain to come, in higher tax or in cuts to public spending, which will have to be announced after the election by whichever party is in power by then.
The Shadow Chancellor, George Osborne, was quick to criticise the proposals, but it's not yet clear what he would do instead. Mr Darling tries to portray the Conservatives as more likely to send the country back into recession, while Mr Osborne says that Labour has failed to address the huge public sector debt, and will leave the country bankrupt.
Whoever is right - and it is possible that they both are - the Pre-Budget Report contains a number of detailed proposals behind the headlines. This document explains the main announcements so you can see how they might affect you.
The tax rates for 2010/11 have already been announced in the April 2009 Budget.The main points are:
50% tax rate on income above £150,000
Tax-free personal allowances restricted if income is over £100,000, reduced to nil by income of £112,950Basic rate 20% up to taxable income of £37,400Higher rate 40% between £37,400 and £150,000Different rates (10%, 32.5% and 42.5%) still applicable to dividend income Normally the tax-free allowances and the threshold for higher rate tax are increased by inflation. As the Retail Prices Index fell in the year to September 2009, these figures have all been frozen at their 2009/10 level. The freezing of the allowance is therefore officially "a real terms benefit", according to the Government.
The PBR included the long-term announcement that the threshold for higher rate tax will be frozen in 2012/13 at the same levels as in 2011/12. If average earnings increase in the meantime, more people will be caught by higher rate tax, and may be brought within self-assessment as a result.
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