Today the Chancellor of the Exchequer Alistair Darling delivered his Pre-Budget Report, but what was in it?

Delivered against a backdrop of rising unemployment, record public sector borrowing and uncertainty about whether the UK has finally escaped recession, the contents of this speech are already being hotly debated.

So exactly what has he promised? Who are the losers and who will be better off? Here are the main points from the Pre-Budget Report 2009.

The headlines

Unlike many pre-election pre-budget reports, there were few giveaways in today’s speech. A promised boiler scrappage scheme could be a popular move, as well as helping householders cut their energy bills.

However, National Insurance contributions (NICs) will rise from April 2011 for anyone earning more than £20,000 a year, while public sector workers face caps on pay and pension contributions.

Houses

Today’s speech confirmed that the stamp duty holiday will finish at the end of the month.

Stamp duty is liable on property purchases of £125,000 or more. It is charged at 1% on properties between £125,000 and £250,000, 3% between £250,001 and £500,000 and 2% above £500,000.  However, a stamp duty holiday on properties worth less than £175,000 was introduced in September 2008. It was designed to shore up the fragile housing market and help first time buyers onto the property ladder.

The exemption ends on December 31, although with the housing market still weak, many had been hoping that the Chancellor would announce an extension.

However, Darling has pledged to continue with the extra investment into the Support for Mortgage Interest scheme, so there will be some ongoing support for homeowners.

Tax

Not only will National Insurance contributions rise by half a per cent from April 2011 for anyone earning more than £20,000, Darling also revealed the inheritance tax threshold will be frozen at £325,000 next year, instead of raised.

In his speech, the chancellor pledged to clamp down on tax avoidance, which he said will help protect £5billion a year of revenue.

Income tax thresholds will be frozen meaning more people will fall into the higher-rate tax bracket as a result of salary increases. Personal allowances will also remain at their current levels.

If you’ve reached retirement but want or need to continue working part time then you’ll also benefit. Darling is going to reduce the number of hours the over-65s have to work before they become eligible for Working Tax Credit.

VAT is going to increase to its former rate of 17.5% from January, which will disappoint retailers.

Of course, it’s not all bad news. Bingo duty is going to fall from 22% to 20%.

Benefits

Because benefits are linked to the Retail Prices Index (RPI), it looked like they wouldn’t rise from April because the country had been experiencing deflation of 1.4%.

However, Darling has confirmed that the basic state pension will rise by 2.5% in April.

Other inflation-linked assistance like child benefits and some disability payments will rise by 1.5% in April.

 

Bankers

There was some cheering news for taxpayers in today’s speech. Previously, it had been anticipated that the bank bailout could cost taxpayers £50billion but Darling said this has fallen to just £10billion.

However, as had been well publicised in advance, the Chancellor announced a clampdown on bank bonuses – although it wasn’t as bad as some had expected. The government has voiced its disgust that many banks are paying employees huge bonuses despite the fact billions of pounds of taxpayers’ money has been pumped into shoring up the industry and collectively the banks made losses of £80billion last year. As a result, Darling announced a one-off tax on bank bonuses.

He demanded banks rebuild their capital base and boost lending rather than pay out high bonuses. Banks that choose to pay out bonuses will be taxed at 50% for all discretionary bonuses above £25,000 – that’s to be paid by the banks and not their employees.

The government estimates this will generate revenue of £500million.

Pensions for high earners

In previous Budget announcements, the Chancellor revealed he wants to cut tax relief on pensions for people earning more than £150,000 – in order to make it fairer.

Today he revealed he will now cut relief on employer pension contributions too, which will hit those earning £130,000 or more a year. 

Public sector staff

Within the public sector, employees will take a hit. Pension contributions are to be capped and public sector pay settlements are to be held at a maximum of 1% for the two years from 2011.

Broadband

It’s the government’s ambition to provide super-fast broadband access to nine out of ten homes by 2017 and Darling confirmed this is going to be funded through a duty of 50p a month on landlines.

The environment

The government recently announced the roll-out of smart meters to all households by 2020 in a bid to make people more energy conscious. Further initiatives aimed at encouraging individuals to make their homes more energy efficient were announced in the Pre-Budget Report.

A boiler scrappage scheme was unveiled which will offer a £400 incentive to 125,000 households if they upgrade an old inefficient boiler to the latest energy efficient models.

An additional £200million is to be ploughed into giving an extra 75,000 homes better insulation, cutting their bills and carbon footprint.

Darling also revealed that electric cars will be exempt from company car tax for the next five years, to boost the number on the road.

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