Bank Levy Offset by Corporation Tax 
Following the Chancellor’s budget yesterday afternoon, the British Bankers Association has said the UK’s banks will not end up paying higher taxes; due to the government’s planned bank levy hike being offset by the drop in corporation tax.

During the budget speech, George Osborne announced that he was planning to increase the rate of the bank levy from 0.088 percent to 0.105 percent from the start of next year; however he also announced that corporation tax will be cut.

The government is looking to raise £2.5 billion a year from the bank levy, which was introduced last year in a bid to encourage banks to reduce short-term funding in an effort to avoid a repeat of the 2008 / 2009 financial crisis.

Chief Executive of the British Bankers Association, Angela Knight, said following the announcement by the Chancellor: “The government has previously said that it both wants the bank levy to raise a specific amount – two point five billion pounds - and that any reduction in corporation tax will be offset by an increase in the levy.

“The corporation tax cut would reduce the amount raised, so as before the percentage has been raised to correct this. The end result is that the banks pay the same.”

It is the fourth time since the controversial tax was announced that Britain’s banks have had the levy on their balance sheets increased.

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Tax Allowances to Rise 
It is expected that later today during his budget speech, the Chancellor, George Osborne will announce that there will be an increase in the amount people can earn before they start paying income tax.

The Chancellor is set to unveil his budget this afternoon, in the House of Commons, and during his speech he is expected to announce that the threshold in which anyone pays income tax will increase to over £9,000 during the next year, in a move which would leave the average taxpayer £305 better off.

Last April, ministers lifted the tax threshold by £1,000 to £7,475; meaning the first £7,475 of a person’s income was not tax deductible; and a further increase of £630 was expected next month, with the Coalition Government pledging to increase the threshold to £10,000 by 2015.

It is unclear how the tax increase will be paid for when it comes into force, however it is expected that the change to the higher rate threshold will mean higher earners will not gain from the change; as the Chancellor looks to make this, his third budget, a budget for the working people.

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UK Borrowing to Fall Below £100 Billion 
It has been estimated that the governments borrowing could fall below £100 billion for the first time since 2008 / 2009.

Economists have said that they expect this weeks budget, underpinned by forecasts from the Independent Office for Budget Responsibility, to reveal a broadly unchanged fiscal and economic picture; leaving the Chancellor, George Osborne, little room to manoeuvre giveaways.

Ahead of the budget tomorrow, George Osborne has pledged that budget will be fiscally neutral, choosing to bank any improvement in the books to reassure markets and protect Britain's triple-A credit rating.

This, along with the government's recent decision to take on the state-owned Royal Mail pension scheme is set to have a significantly beneficial impact on borrowing over the next year; although improvement is not expected to follow through to forthcoming years, meaning the budget deficit could run higher again in 2013 / 2014.

As a result, it is widely believed the OBR's underlying 2012/ 2013 public sector net borrowing estimate could hold in line with November's forecast for £120 billion, given the little change in the economic outlook.

Taking into account the Royal Mail transfer, the government’s borrowing forecast is down to around 92 billion pounds in 2012/ 2013. It is the first time the budget deficit has dropped below £100 billion since the global financial crisis of 2008/ 2009.

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Budget to Focus on Business Tax Avoidance 
Businesses are expected to face a permanent tax crackdown on abusive tax schemes, under schemes set to be unveiled by the Chancellor, George Osborne, in Wednesday’s budget.

It is widely believed that tax avoidance is set to be at the heart of the budget, with the Chancellor telling the Andrew Marr Show, yesterday, that the it would be “a budget for working people”, at the same time as pledging to “come down like a tonne of bricks” on those who used tax avoidance schemes.

Treasury sources have also fuelled speculation that tax avoidance will be the main element of the budget, by suggesting the government is set to adopt the GAAR, following a recent report by Graham Aaronson QC, despite businesses traditionally being wary of the General Anti-Abuse Rule (GAAR), due to it complicating tax planning, as under a GAAR companies have to disclose their tax arrangement in advance and schemes can be shut.

Mr Aaronson has attempted to address such concerns by businesses, by recommending an “anti-abuse” rule rather than an “anti-avoidance”, which would limit the scope of its application.

Mr Aaronson said: “A general anti-abuse rule narrowly targeted to deter such schemes, while not affecting responsible tax planning, should lead to a fairer, more principled and ultimately simpler tax system.”

The clampdown on tax avoidance is also expected to be used as a way to justify a reduction in the top rate tax, from fifty-pence to forty-five pence.

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Fifty Pence Tax to be Scrapped 
With less than a week to go before the Budget, the Chancellor, George Osborne, has given the biggest indication that he is to scrap the fifty-pence tax.

Mr Osborne has come under intense pressure from business leaders, as well as many in his own party, to slash the top rate of income tax amid claims it deters money-makers from being based in the UK.

Although Downing Street insisting the claims that the levy on earners over £150,000 would be reduced to 40p were "speculation", newspaper reports suggest that Mr Osborne is set to push ahead with a reduction in the fifty pence tax rate after analysis found the levy is reaping substantially less for the Exchequer than expected.

The newspaper reports suggest that a preliminary study, due to be published next week, is to show the tax on the highest earners is bringing in hundreds of millions, not the £2.6 billion predicted

A government source said: "The budget has to strike a balance. It has to show we are all in this together, but it also has to show that as a country we are open for business. We want a top rate that does not put off entrepreneurs or businesses.

“It is one of the highest top rates worldwide at a time when we need real growth. Above all, real growth is what we need to promote wealth and prosperity."

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