Osborne cuts top rate of tax by 5%

British chancellor George Osborne cut the top rate of tax for the biggest earners today, claiming that the controversial 50 per…

British chancellor George Osborne cut the top rate of tax for the biggest earners today, claiming that the controversial 50 per cent rate was damaging the economy.

The Conservative minister pressed ahead with the move - unpopular with some Liberal Democrats - after revealing that an official report by the taxman had found it was raising “next to nothing”.

In a 45-minute presentation, the chancellor also reduced proposed cuts to child benefits paid to the better off. But he increased the threshold at which everyone starts paying tax to £9,205, claiming millions of working people would be £220 a year better off as a result.

The cut in the top rate of income tax to 45 per cent for all income over £150,000 from April 2013 was countered with a hike in stamp duty on homes worth over £2 million from 5 per cent to 7 per cent.

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The chancellor also confirmed a crackdown on various tax loopholes used by the rich including a 15 per cent stamp duty rate on homes held through companies.

Overall, Mr Osborne claimed his measures would raise five times more from the wealthy than the 50 per cent top rate introduced by Labour.

But Labour leader Ed Miliband said the budget meant millions would pay more while millionaires paid less. “It is a millionaires’ budget that squeezes the middle,” he said.

The chancellor has been besieged with calls from the motoring lobby for a cut in fuel duty as forecourt prices have soared to record highs. But Mr Osborne said he does not propose to make any further changes to the fuel duty.

He also dealt a blow to smokers saying that duty on all tobacco products would rise by 5 per cent above inflation - slapping 37p on a packet of cigarettes from 6pm tonight. He said there would be no further changes to alcohol duty rates.

The chancellor also signalled that millions of workers may have to work longer before they can retire. "I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity," he said.

Mr Osborne also set a target for savings in the welfare budget of £10 billion by 2016.

The Chancellor announced another 1 per cent cut in the rate of corporation tax from next month to 24 per cent.

He said that by 2014, the rate would be 22 per cent which is “dramatically lower” than competitors.

The chancellor predicted slightly better than expected economic growth as he unveiled a budget which he said “rewards working families and helps those looking for work”.

Mr Osborne said the Office for Budget Responsibility expects UK plc “to avoid a technical recession with positive growth in the first quarter” of this year.

He said the OBR had reported that the economy has “carried a little more momentum into the new year than reviously anticipated”.

Mr Osborne also gave an upbeat assessment of attempts to beat down the UK’s debt mountain. He said public debt is set to peak at 76.3 per cent of GDP in 2014-15, almost 2% lower than previously forecast - before falling the following year.