15:37pm Tuesday 22nd June 2010

The budget announcement earlier this afternoon has proved to boost the Pound against both the Euro and the US Dollar in the first few hours of post-budget trading. At 3.00 pm this afternoon Sterling had gained reaching mid-market rates of 1.2054 against the Euro and 1.4813 against the US Dollar. Speak to your broker to take advantage of a strong Pound this afternoon for any upcoming transfers.

There can be no certainty over how long these rates will last but the initial response from the markets seems to suggest that investors have gained confidence in Sterling following the ‘firm but fair’ measures that Osborne has introduced to reduce the deficit. Early signs show that Osborne’s budget has convinced investors that the UK now has a credible plan in place to reduce the deficit and move on to recovery. This should also crucially help to protect the UK’s top AAA credit rating which is fundamental to recovery and stability – although the state of the markets tomorrow and beyond will give a clearer picture of if investor confidence is short or long term. Sign up to our daily news to be updated tomorrow. 

Summary of the main budget policies:

Tax

VAT to rise to 20% from January 2011
Capital Gains Tax to rise to 28% from midnight for higher rate tax payers
Capital Gains tax to remain at 18% for basic rate tax payers
Personal income tax allowance to rise by £1,000 in April to £7,475
Higher rate income tax rate remains frozen until 2013/2014
No tax increases on alcohol, tobacco or fuel
Higher rate income tax rate remains frozen  until 2013/2014
National Insurance threshold to rise by £21 next year

Business

Corporation tax cut to 27 percent next year
Small companies’ tax rate cut to 20 percent
UK bank and building society levy to be introduced from 2011

Welfare and Public Sector

Welfare cuts worth £11 billion by 2014/15  

Child benefit removed and tax credits reduced for families on an income of more than £40,000

Public sector pay to be frozen for two years
Basic state pension to be linked to earnings from April next year
Spending and budget reduction
Government spending will be £637billion in 2010/2011
Government spending will be £711billion in 2015/2016
Deficit to fall to 1.1 percent of GDP by 2015/2016 from 10.1 percent in 2011

Currency Report by Nigel Hodges.

Get your free online quote from Currency Solutions here