Budget: Pensioners hit and 50p tax rate is cut

Chancellor of the Exchequer George Osborne holds up his red Ministerial Box outside 11 Downing Street Credit: Lewis Whyld/PA Wire

George Osborne announced a raft of measures in his Budget speech, including a cut in the 50 pence higher tax rate, a 5% rise in tobacco duty and an increase in personal allowance.

But it was the lowering of pensioners' tax allowances that grabbed the headlines, as the Chancellor was accused of imposing a £1 billion "granny tax" on pensioners.

The Treasury acknowledged that 4.5 million pensioners will lose out as a result of the decision to phase out their age-related allowances.

Economist Ros Altmann is director-general of the Saga Group:

The 50p top rate on earnings over £150,000 introduced by Labour will be cut to 45p from April next year, after a study by HM Revenue and Customs (HMRC) found it raised "next to nothing", said Mr Osborne.

The widely expected cut was offset by a hike in stamp duty on properties worth more than £2 million and a commitment to clamp down on "aggressive" tax avoidance.

Mr Osborne also announced "the largest ever increase in personal allowance - the amount people can earn tax free", he said it will increase by £1,100 from next April.

There was good news for business as the Chancellor announced another 1% cut in the rate of corporation tax from next month to 24%.

He said that by 2014, the rate would be 22%, which is "dramatically lower" than competitors'.

Business Editor Laura Kuenssberg was with company bosses when the announcement was made:

And the Chancellor said the duty on all tobacco products would rise by 5%, an increase of 37 pence a packet, to take effect by 6pm tonight.

Smokers' group Forest attacked the Chancellor's decision to increase tobacco duty.

Mr Osborne said that child benefit will only be taken away when one person in the household earns over £50,000 a year and will then be withdrawn gradually.

This means that two people earning £49,000 a year in one house would still be able to claim full child benefit.

Child benefit will only be withdrawn from those where one person in the household earns over £50,000 per year Credit: Reuters

Mr Osborne also confirmed there would be no cuts on fuel duty.

In reply, Labour leader Ed Miliband tore into the Chancellor's speech calling it a "millionaires' Budget".

The Labour leader ended his reply by saying that the Budget marked the end of the claim that "we're all in it together".

Full details of the Budget have been published by the Treasury.