PBR re-cap: A bank bonus levy and more NI

The Pre-Budget Report (PBR) should, according to the Treasury, “encourage debate on the proposals under consideration for the Budget”. But can you remember the Chancellor’s key messages from December?

Alistair Darling's third PBR pointed the finger of blame for Britain's gaping budget deficit and sharp economic downturn at the global financial crisis and set out Labour's plans for long-term growth.

Ahead of tomorrow's annual Budget, IFAonline re-caps some of the main PBR points:

Economy

• The UK will return to growth in Q4. Darling sticks to growth forecast of 3.5% in 2011-2012.
• Consumer inflation will rise from 1.5% to around 3% early next year, before falling. Inflation should reach 1.5% by the end of 2010.

National insurance

• All employer, employee and self-employed rates of national insurance (NI) to rise by a further 0.5% from April 2011.
• Starting point from which NI is payable to be raised so that no one earning less than £20,000 will pay any more in contributions.

Taxes

• VAT to return to 17.5% on 1 January.
• One-off levy of 50% on bank bonuses above £25,000, to be paid by the bank.
• Employer pension contributions to be included in definition of tax income relating to pensions tax relief for those earning more than £130,000.
• In April 2012, the point at which people start paying 40% income tax to be frozen for one year, hitting those earning more than £43,000.
• Individual inheritance tax allowance to be frozen at £325,000 for the next year.

Borrowing

• Public borrowing to reach £178bn for this year, and fall in subsequent years, reaching £82bn in 2014-15.
• As share of GDP, borrowing will be 12.6% this year, 12% next year, then 9.1%, 7.1%, 5.5% in 2013-14 and falls to 4.4% in 2014-15.

Pensions

• Basic state pension to rise 2.5% in April.

Small businesses

• Scheme for bank loans to small businesses to be extended one year, guaranteeing a further £500m of loans.

You can follow all tomorrow's Budget developments LIVE on IFAonline tomorrow from about midday.