Here's our step by step analysis of the Chancellor's speech, with comments by Gillian Hadden and John McAuslin .

Buy The Herald tomorrow for our full Budget 2014 analysis in association with Johnston Carmichael.


Loading article content

Gillian Hadden (GH), senior tax manager, and John McAuslin (JM), tax director, from Johnston Carmichael


Chancellor of the Exchequer George Osborne rose to deliver his fifth Budget to the House of Commons at 12:33pm.

Mr Osborne told MPs: "The economy is continuing to recover and recovering faster than forecast... we held our nerve, we're putting Britain right. But the job is far from done."

Mr Osborne said his statement would be "a Budget for building a resilient economy".

Deficit will be down "by a half" in the coming year but remains "one of the fastest in the world".

Office for Budget Responsibility confirms economy grew by "three times as much" as forecast 0.6% in 2013.

OBR predicts 2014 GDP growth of 2.7%, then 2.3% in 2015, 2.6% in 2016 and 2017, and 2.5% in 2018.

Upward revision of GDP figures means UK economy will be £16 billion larger than OBR forecast four months ago.

Mr Osborne told MPs: "The biggest risk is clear - abandoning the economic plan that is working."

OBR forecasts 1.5 million more jobs over the next five years, and earnings to grow faster than inflation this year and in every year of the forecast.

OBR revises down the underlying deficit to 6.6% this year, 5.5% in 2014/15 then 4.2%, 2.4% and reaching 0.8% in 2017/18 and a surplus of 0.2% in 2018/19.

Mr Osborne told MPs: "Faster growth alone will not balance the books... there will have to be more hard decisions, more cuts."

Borrowing expected to be £108 billion this year - £12 billion less than forecast a year ago.

OBR predicts borrowing will fall to £95 billion in 2014/15, then £75 billion, £44 billion and £17 billion in subsequent years with a surplus of almost £5 billion in 2018/19.

Borrowing forecasts mean the UK will borrow £24 billion less than previously predicted over the period.

OBR revises down national debt to 74.5% of GDP this year, then 77.3% next year, reaching a peak of 78.7% in 2015/16 and falling to 78.3%, 76.5% and 74.2% in following years.

Reduced debt forecast implies £42 billion saving on interest payments.

GH: this frees up money that could be used elsewhere.

Remit for Bank of England Monetary Policy Committee reconfirmed, including target of 2% CPI inflation, which the OBR expects to be met this year and in the years ahead.

The Bank's financial policy committee asked to be "particularly vigilant against the emergence of potential risks in the housing market".

All Budget decisions are "paid for", with both taxes and spending lower, said Mr Osborne.

Government to seek the support of Parliament in a vote for a deficit reduction path meaning cuts not only this year and next but following next year's general election.

Chancellor promises to make permanent £1 billion reduction in departmental overspends.

Welfare cap set at £119 billion for 2015/16, rising to £127 billion by 2018/19, with only the state pension and cyclical unemployment benefits excluded.

People signed-up to disclosed tax avoidance schemes to be required to pay their taxes upfront.

Measures against tax avoidance include increase in HMRC budget for non-compliance, block on transfers of profits within groups and increased tax credit debt recovery rates.

JM: This is part of their ongoing policy to reduce tax avoidance but at the same time it will accelerate the cash that is being brought into the Treasury.

Compliance checks on migrants claiming benefits they are not entitled to to save almost £100 million.

Tax on homes owned through a company to be extended from residential properties worth more than £2 million to those worth more than £500,000. Residential property worth more than £500,000 bought through corporate envelope to be liable to 15% stamp duty.

LIBOR fines to be used to support search and rescue and lifeboats and provide £10 million to scouts, guides, cadets and St John's Ambulance.

Inheritance tax waived for emergency services personnel who "give their lives protecting us". VAT waived on fuel for air ambulances and inshore rescue boats.

GH: That's a welcome gesture to those families and people who provide this service.

Government to fund Survivors For Peace charity set up by IRA victim Tim Parry's parents and to support scholarships for Lockerbie people to study in the USA.

£20 million to pay for repairs to cathedrals ahead of First World War remembrance services. State to provide grants to Magna Carta Trust to support 800th anniversary next year.

Lending for exporters doubled to £3 billion and interest rates on that lending cut by one third.

JM: I would expect this will be good for the Scottish food and drink industry

Reform of air passenger duty so all long haul flights carry the same tax rate as currently charged for flights to USA.

Government to take forward all recommendations of Wood Report into North Sea oil and gas and review the sector's tax regime. OBR revises down forecast tax receipts from North Sea by £3 billion.

Housing policies announced today to support more than 200,000 new homes.

Chancellor approves £270 million guarantee for the Mersey Gateway bridge.

Legislation to give Welsh Government tax and borrowing powers to fund infrastructure needs, including improvements to M4 motorway.

Additional £140 million made available for repairs and maintenance to flood defences. Additional £200 million for potholes.

JM: this investment and the decision to extend the Government's help to buy schemef for the rest of the decade will be welcomed.

Mr Osborne said he was "determined" that the HS2 rail link should go "further north faster".

New Alan Turing Institute founded to ensure Britain leads the way in big data and algorithm research.

Collection of class 2 national insurance contributions to be moved to self-assessment, removing red-tape for 5 million people.

Business rate discounts and enhanced capital allowances in enterprise zones extended for further three years, with first Northern Ireland enterprise zone to be established near Coleraine.

Research and development tax credit for loss-making small businesses raised from 11% to 14.5%. Seed enterprise investment scheme made permanent and social investment tax relief at 30%.

JM: This is good news for the technology sector and SMEs. It will increase investment in small businesses.

From September, 20% tax relief for theatre productions, and 25% for regional touring.

Annual investment allowance doubled to £500,000 and extended to the end of 2015.

The 2% increase in company car tax to be extended to 2017 and 2018, with increased discount for ultra-low emission vehicles.

A £7 billion package to cut energy bills includes £18 per ton cap on carbon price support rate from 2016 to the end of the decade, saving medium-sized manufacturer £50,000 and families £15 a year.

GH: This is another boost for the manufacturing sector. The Government is trying to get the UK making and exporting again.

Compensation scheme for energy intensive industries extended four years to 2019/20, with almost £1 billion to protect these manufacturers from cost of green levies.

Fuel duty rise planned for September "will not take place".

GH: This will be welcomed by families and the manufacturing sector.

Duty on fixed odds betting terminals increased to 25%, horse racing betting levy extended to offshore bookmakers and bingo duty halved to 10%.

JM: The Government has introduced specific targeted tax increases in the gambling sector but this decision to half bingo duty will be welcomed by communities and will help create jobs.

Tobacco duty to rise by 2% above inflation, and the escalator extended for the rest of the next Parliament.

Alcohol duty escalator scrapped, so taxes will rise in line with inflation except for on whisky and other spirits, where it is frozen.

JM: scrapping the tax rise and therefore freezing duty is exactly what the Scottish Whisky Association wanted, they will be pleased with this announcement.

Duty on ordinary cider frozen. Beer duty cut by 1p a pint.

GH: that's two years in a row

Personal tax allowance to be raised to £10,500 next year, resulting in £800 income tax reduction for typical taxpayer.

JM: that's a 62% increase since the UK Government took over. It will definitely help families.

Higher rate threshold for 40p income tax to rise from £41,450 to £41,865 next month and then by a further 1% to £42,285 next year, with the full benefit of increase in personal allowance passed on to higher rate taxpayers.

Transferable tax allowance for married couples to rise to £1,050.

Cash and stocks ISAs to be merged into single New ISA with annual tax-free savings limit of £15,000 from July 1. Limit for Junior ISA raised to £4,000.

JM: this aims to simplify ISAs, making them more manageable for savers.

New Pensioner Bond paying market leading rates to be available from January to all over 65s, with possible rates of 2.8% for one-year bond and 4% for three-year bond.

Cap on Premium Bonds to be lifted from £30,000 to £40,000 in June and £50,000 in 2015, and number of £1 million winners to be doubled.

Reform of taxation of defined contribution pensions to help 13 million people from March 27.

All tax restrictions on pensioners' access to their pension pots to be removed, ending the requirement to buy an annuity. £20 million fund to develop new free right to advice for those retiring on defined contribution pensions.

Tax on cash taken out of pension pot on retirement to be reduced from 55% to 20%.

GH: This is good news for those approaching retirement age. It will give them more control of their pension, more flexibility and it's rewarding those who have saved their pension.

Abolition of 10p starting rate of tax on income from savings.

JM: This will be welcome, especially for small savers who could save almost £300.

Mr Osborne completed his statement at 1:28pm.