Budget June 2010: key points

George Osborne outside No 11 Downing StA round-up of the key points from Chancellor George Osborne's first Budget

Families

  • Health In Pregnancy grant will be abolished from January 2011 and the Sure Start maternity grant will go to first child only from April 2011
  • Child benefit frozen for the next three years, but no means-testing to be introduced at present
  • Lone parents whose youngest child is over five will be moved on to Jobseekers Allowance rather than Income Support from 2011-12
  • Tax credits eligibility reduced for some families earning over £25k from 2012/13* and for some families earning over £50k in 2011/12. The baby element of the Child Tax Credit will be removed - both from April 2011. 
  • Backdating of tax credits to be reduced from three months to one month from 2012-13 for new claims and changes in circumstance
  • Child element of the Child Tax Credit to be increased by £150 above indexation in April 2011 and £60 above indexation in April 2012
  • Reduction of the income disregard to £10,000 from £25,000 – bringing in the point at which working tax credits can be clawed back when family income increases – reversing Labour's decision to increase the disregard in 2006
  • Withdrawal rates increased to 41% from 2011/12 – so for every pound earned over the threshold, 41p of tax credit will be withdrawn
  • From April 2011, the weekly amount that parents joining an Employer-Supported Childcare scheme will be able to claim exempt of income tax and disregarded of NICs will remain at £55 for basic rate taxpayers, but will be reduced to £28 and £22 per week for higher and additional rate taxpayers respectively

Tax

  • Personal income tax allowance increased by £1,000 to £7,475 in April 2011, which will take 880,000 people out of the tax system
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  • VAT will rise from 17.5% to 20% from 4 January 2011; VAT on insurance will rise from 5% to 6%; current zero-rated items such as food, children's clothes and magazines will remain exempt
  • Corporation Tax will be cut next year to 27%, and by 1% annually for the next three years, until it reaches 24%; small companies' tax rate will be cut to 20%
  • Councils who aim to freeze or reduce their council taxes for 2011/12 will be compensated by the government
  • Capital Gains Tax remains at 18% for low and middle-income savers, but from midnight on 22 June 2010 higher rate taxpayers will pay 28%

Benefits

  • Housing Benefit to be reformed with caps on maximum rates for property sizes
  • Allowance introduced for families who need an extra room for a carer
  • Disability Living Allowance (DLA) to be reformed by introducing medical assessments for all DLA claimants from 2013-14

Public sector

  • Two-year pay freeze for public sector workers but the 1.7 million lowest paid (under £21k) will get a flat £250 pay rise over those two years

Duties

  • No change to alcohol and cigarette duty
  • Planned increase in cider duty to 10% above inflation scrapped from the end of June
  • Possibly switching from a per-passenger to a per-plane duty being explored

Pensions

  • Basic state pension linked to earnings from April or increased by 2.5%, whichever is higher 

* From 2012/13, families earning over £25k with just one child over the age of one (with no entitlement to baby, childcare or disability elements) will see their tax credits drop to £460/year, families earning over £30k under the same circumstances will receive no tax credits from 2012/13.

Budget reaction 

How does it affect you? Were you expecting the cuts to be worse? Share your reaction to the June Budget with other Mumsnetters on our Politics Talk board.

Last updated: 23-Mar-2011 at 2:39 PM