Budget 2011: Help for first-time buyers and income tax cut

Chancellor George Osborne is expected to increase the personal income tax allowance by a further £600 and announce a £250m scheme to help first-time buyers in today’s Budget.

In last year’s Budget, the Chancellor announced the allowance would rise by £1,000 from April 2011 to £7,475, alongside a £1,400 cut to the threshold for those paying 40 per cent tax.

The further £600 income tax allowance increase to £8,045 from April 2012 will benefit everyone earning under £115,000. The Times reports the move will lift 250,000 people out of income tax altogether.

It is a step towards delivering the Government’s pledge to raise the income tax threshold to £10,000 before the next election.

Osborne is also expected to announce a new £250m scheme to support for first-time buyers.

Under the scheme 10,000 people buying newly built homes will receive 20 per cent of the cost of the house in the form of low-cost loans from the Government and the builder.

It will be funded evenly, half by the Department of Communities and Local Government and half by the house builder, and those with incomes of less than £60,000 will be able to apply. If they are successful they will have to fund around 5 per cent of the average deposit themselves.

They would have to repay nothing for five years and repayments would start at 1.75 per cent in year six rising by 1 per cent above inflation each following year.

What else will appear in the Budget?

  • The OBR is expected to downgrade the GDP growth rate for 2011 from 2.1 per cent to 1.8 per cent as a result of 0.6 per cent contraction in growth in the last quarter of 2010. For 2012 it is likely to fall to 2.1 per cent from 2.6 per cent.
  • The Chancellor is expected to look to raise additional revenues from non-dom taxes. In February in was reported that Osborne was considering replacing the current £30,000 annual charge on non-doms living in the UK for over seven year with a flat rate charge regardless of how long they have lived here.
  • Osborne is likely to float plans to consult on the Office of Tax Simplification’s recommendation to merge national insurance and income tax. The move was called for in a recent OTS report which suggested it should be a “long-term” objective.
  • At a recent event, Osborne hinted that the Treasury may look to make changes to the EIS and VCTs in the Budget. Experts predict the Chancellor may clamp-down on limited-life VCTs.
  • Osborne may also cut fuel duty and scrap the expected rise in air passenger duty but will levy a new tax on private jets.
  • The Chancellor may look to stop VAT-free goods being imported form the Channel Islands through low value consignment relief.
  • George Osborne will look to tighten the rules governing Employer Financed Retirement Benefit Schemes, suggesting the offshore pension trusts are a form of “disguised remuneration”.

Money Marketing will be providing full coverage of today’s Budget from 12.30 today.