Budget 2009: the key points at a glance

IRS pay specialists summarise the key announcements contained in the Budget statement delivered by Chancellor Alistair Darling on 22 April 2009. 

Economy

The Chancellor expects the economy to start growing again towards the end of 2009. Gross domestic product (GDP) growth forecasts are for:

  • -3.5% in 2009;
  • 1.25% in 2010; and
  • 3.5% in 2011. 

The annual trend rate of growth is forecast to be around 2.75% "in future years". 

Consumer prices index (CPI) inflation is expected to continue to fall sharply, reaching 1% by the end of 2009. The Government's inflation target will remain at 2%. 

Retail prices index (RPI) inflation is expected to fall to -3% by September 2009, before moving back above zero in 2010. 

Jobs and training

  • £1.7 billion funding (in addition to the £1.3 billion in the Pre-Budget Report) for Jobcentre Plus and the New Deal plus additional support through the Flexible New Deal. 
  • From January 2010 anyone aged under 25 who has been unemployed for 12 months guaranteed a job or training place. 
  • Extra investment (£250 million this year) for further education places. 

Public finances

  • Public borrowing - £175 billion this year (12.4% of GDP), £173 billion in 2010/11, then £140 billion, £118 billion and £97 billion for the following years. 
  • Additional government efficiency savings of £9 billion by 2013/14 (on top of the £26.5 billion that has already been saved since 2004). 
  • Current spending growth - 0.7% per year from 2011/12 onwards. 

Support for business

  • Main capital investment allowance to double to 40% from 2009/10. 
  • £500 million support for the building industry to help companies borrow to build new homes. 
  • Help for companies to reclaim tax on profits extended until November 2010. 
  • New top-up credit insurance scheme. 
  • A "scrappage" scheme to help automotive sector (ends March 2010). 

Taxes and benefits

  • 50% income tax rate from April 2010 for those earning more than £150,000 (up from the 45% rate proposed in the Pre-Budget Report one year earlier). 
  • Personal allowances removed for those earning more than £100,000 from April 2010 (Pre-Budget Report proposal had been to restrict rather than to remove it entirely). 
  • Redundancy pay to increase from £350 to £380 a week. 
  • Child element of tax credit to increase by £20 a week from April 2010. 
  • Work carried out by grandparents of working age caring for their grandchildren to be taken into account when calculating their entitlement to the basic state pension. 
  • Tax relief on pensions to be cut for those earning £150,000 a year or more. 
  • Basic state pension to be increased by at least 2.5% regardless of the level of RPI. 
  • Savings limit for pension credit to increase to £10,000 from November 2009. 

Other proposals

  • Stamp duty holiday on properties sold for less than £175,000 extended to end of 2009. 
  • Fuel duty up by 2p a litre in September 2009. 
  • Alcohol and tobacco duties up 2% from midnight. 
  • Treasury to publish proposals on reform of financial regulation. 
  • Various proposals on climate change including £450 million of investment in green technology. 
  • Total annual limit on ISA savings increased to £10,200 from this year for over-50s and next year for everyone else. 

Also