George Osborne has used his 2012 Budget to cut taxes at both ends of society, by raising the threshold at which people start to pay income tax and by cutting the 50p top rate of tax for the wealthy.

The Chancellor announced that people will not have to pay income tax on any earnings below £9,205 which he said would leave millions of working people £220 better off every year.

The "further and faster" acceleration towards a £10,000 income tax threshold can be seen as an attempt to offset a potentially unpopular decision to give wealthier Britons a tax cut as well.

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Osborne unveiled a cut in the top rate of tax from 50p to 45p on earnings over £150,000 a year, a move sought by many Tory backbenchers, but the change will not come into force for a year.

Speaking in the House of Commons on Wednesday, Osborne said his Budget would help create a tax system "where millions of the lowest paid are lifted out of tax all together" as well as one "more competitive for business than any other major economy in the world".

He said the the 50p tax rates had "caused massive distortions" as £16bn of income was deliberately shifted into the previous tax year at a cost to the taxpayer of £1bn.

"No chancellor can justify a tax rate that damages our economy and raises next to nothing it is a simple as that," he said.

"Thanks to the other new taxes on the rich i have announced to day we will be getting five times more money every year from the wealthiest in our society."

• Liveblog - Updates from the TV shows and the Commons
• At-a-glance - the key measures
• Child Benefit U-Turn
• Double Dip Recession looking unlikely, says the OBR
• Tax changes - the 50p rate is going
• 37p on a packet of cigarettes - get ready for the £9 packet of ciggies
• The duty changes in full - booze, ciggs and petrol - it's not good!

• Reaction from key politicians, union leaders and businesses - and Twitter, of course

The tax cuts are to be funded by stiffer penalties on stamp duty for the most expensive homes, along with making it harder for the wealthy to avoid paying the taxman.

"Most wealthy people pay their taxes and without them we could not afford the public sieves upon which this country depends," he said.

But Osborne said tax evasion and excessive avoidance was "morally repugnant" and the government would take action to curb it.

And he said stamp duty on properties worth over £2m would now be 7%. "If you buy a property in Britain for residential purposes, we will expect stamp duty to be paid," he said.

The move to raise the income tax threshold was a key Liberal Democrat manifesto pledge and the party are likely to take credit for today's decision.

Ed Miliband attacked the decision to axe the 50p tax rate at a time when public spending was being cut.

"We know the driving ambition of this budget for the chancellor was to deliver a tax cut for people earning over £150,000," he said.

"Let me tell him, every time in the future he tries to justify an unfair decision by saying times are tough, we’ll remind him: He’s the man who chose to spend millions of pounds on those who need it least."

And the Labour leader suggested the government front bench would benefit personally from the decision. "Hands up in the Cabinet if you are going to benefit from the income tax cut?" he asked.

"For ordinary families it's hurting but it's not working. This government has been cutting too far and too fast."

He added that the Budget was: "Unfair, out of touch, for the few not the many, an unfair Budget built on economic failure, an unfair budget from the same old Tories."

Osborne also revealed the Office for Budget Responsibility (OBR) had forecast that Britain is set to avoid second recession with growth forecast for this year revised upwards to 0.8%, 2.7% in 2014 and 3% in 2015-2016. And the chancellor said the OBR expected one million more jobs to be created over the next five years.

This Budget was possibly the most leaked in history, with a large number of the measures trailed in the press over the past week and there were few surprises today.

Among the other measures announced by the chancellor were tax breaks for the film and video game industry, council tax relief for members of the British armed forces, a 1% cut in corporation tax and the examination of regional pay rates for public sector workers and a 5% rise in duty on cigarettes.

He also watered down proposals to cut child benefit from high earners. Osborne had planned to take it away from people earning around £40,000, but this was raised to £50,000.

The chancellor also said the withdrawal would be tapered so 1% of child benefit would be taken away for every £100 a parent earned over £50,000. Only those who earn more than £60,000 will lose it completely.

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Should it be #grandpatax instead of #grannytax?

@ guywalters : It's a #grandpatax as well you know

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5m set to lose out over #grannytax

@ joyless60 : #grannytax Dot Gibson gen sec of Nat pensioners convention 5m will be worse off. #bbcnewschannel Passionate advocate for pensioners

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Were @BBCNormanS's comments on the #grannytax a sign of BBC impartiality?

@ eljmayes : The BBC's Norman Smith has just stated that his mum wouldn't be impressed by the supposed #GrannyTax- bias towards Labour?

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@BBCNormanS gets personal on the #grannytax

@ CallumJonesBlog : @BBCNormanS on Treasury's follow up to #grannytax: "my mum won't be happy with that argument"

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If Osborne hadn't leaked - would #grannytax be so talked about?

@ anthonypainter : The irony is that by leaking everything else, the Coalition has focused attention on the #grannytax ! Genius. #budget2012

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CCHQ bring in help for defence over #grannytax

@ RicHolden : IoD: ‘This budget brings three items of good news for pensions’ http://t.co/gbouGq5y #Budget2012

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Should the LibDems put "yellow water" between themselves and the Tories on #grannytax?

@ MirrorJames : Top Lib Dems distancing themselves from 50p - should try putting some yellow water between themselves and the #grannytax #Budget2012

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Is Danny Alexander ashamed of the #grannytax?

@ 1957AJB : Danny Alexander ashamed of #grannytax http://t.co/gjwtNPEQ And so he should be

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Is the #grannytax fuss overblown?

@ gordoh : Personal view: #grannytax fuss is overblown. Hits some but impact modest. Too many reactions verging on hyperbole. #budget2012

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Is the #grannytax actually what it says?

@ faisalislam : Its not really a #grannytax though is it? The HMRC costing says 58% paid by male over-65s.

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GQ has collected the best #Budget2012 jokes, #grannytax not included.

@ AndrewPageCFP : RT @janemerrick23: Key about #grannytax Osborne has spectacularly failed Daily Mail Test by punishing readership: middle class pensioners

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Has Osborne angered the Daily Mail over the #grannytax?

@ AndrewPageCFP : RT @janemerrick23: Key about #grannytax Osborne has spectacularly failed Daily Mail Test by punishing readership: middle class pensioners

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Has George Osborne hid a second #grannytax in his Budget?

@ Simon_Nixon : Stamp duty hike is in fact another disguised #grannytax since it will be ultimately be paid by home sellers in form of lower house prices.

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What would the Queen have thought about the #grannytax?

@ jamiesont : Osborne lucky the #grannytax didn't leak yesterday or The Queen would have shoved his smug face through that stained glass window.

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Age UK have attacked the #grannytax

@ BBCNormanS : Age UK say pensioner with an income of 10500 pounds a year cd be 259 pounds a year worse off cos of #grannytax

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@TomWatsonMP isn't thinking of #grannytax, but the latest in #hacking and Rebekah Brooks

@ tom_watson : I'm distracted from #Budget2012 and #grannytax by news from a police station in Milton Keynes: http://t.co/P4uVL6x6

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#grannytax was one of the few things not to be leaked in the #budget2012

@ SimonBatchelor1 : Anybody surprised the only bit of the #budget2012 not to leak was the #grannytax No thought not #bbcbudget

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Why did Osborne do the #grannytax in his #Budget?

@ martinnicholls : Osborne's #grannytax own-goal is surprising given the number of Tory voters it'll piss off. Unusually clumsy bit of politics #budget

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@Johnprescott has made a #grannytax poster

@ johnprescott : My latest #giveitbackdave #grannytax poster - made here http://t.co/xHDefEFw http://t.co/uSWBa9ux

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The argument for the #grannytax?

@ jamesrbuk : Am thinking @helenlewis is right. Someone should write a defence of the #grannytax in relation to intergenerational justice etc.

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As #grannytax rivals Justin Bieber on Twitter, what will George Osborne do?

@ RichardJMurphy : Gordon Brown had his 10p tax fiasco and his 75p pension rise. Osborn tries to do both with his #grannytax charge on all new pensioners

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Will Osborne's team tackle the #grannytax furore?

@ martinnicholls : RT @edstaite: #grannytax is trending and not just with Lobby hacks. Osborne team need to hit back quick & hard #speedkills

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Will the LibDems do anything about the #grannytax?

@ PatJHennessy : Why didn't the LibDems raise a fuss about the #grannytax ?

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Isn't this why the #grannytax is controversial?

@ chrisshipitv : 230,000 pensioners will be brought INTO paying income tax. 360,000 OAPs lose £285/year. Did Treasury not think controversial? #grannytax

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Treasury source tells HuffPost on #grannytax...

"It's about simplification, it was never going to be an easy decision but it had to be done at some point."

The source says the furore was expected and planned for, but they insist that simplifying the personal allowance is in the public interest.

But expected or not, 4.5 million pensioners are going to be affected and it's rapidly becoming the story of the day.

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Westminster is abuzz with the news that the price of fags is set to go up.

@ FelicityParkes : I've just queued up with half a dozen people, all buying cigs like it was going out of fashion. Eat my smoke, Chancellor! #budget2012

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Labour's one-page Budget response

...is here on Twitpic (posted by Tim Montgomerie of ConHome)

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Gavin Shuker MP trials a potential attack line

@ gavinshuker : George Osborne's #grannytax means 4.5m pensioners will lose out. £3bn squeezed from over 65s over the next four years.

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Is this Osborne's big mistake?

@ ShippersUnbound : Could the #grannytax be Osborne's 10p fiasco? Discuss...

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Ros Altmann, Chief Exec of SAGA, blasts pension changes

She tells HuffPost:

“This is an outrageous assault on decent middle-class pensioners.

“This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,000 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.

“There is nothing in this Budget for savers, there is nothing to improve the annuity market, nothing to appease the damage of quantitative easing and nothing to support ISA changes and shelter older people’s money in cash. This Budget is terrible news for pensioners.”

“It is good to hear that we will be able to harness the power of pension funds to improve UK Infrastructure but in short, this Budget is another shocking example of the Government’s attack on poorer and older people. It is dramatically unfair.”

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