1986 United Kingdom budget

Overview

Lawson's idea with "popular capitalism" was to create a society "in which more and more men and women have a direct personal stake in British business and industry", building on the already growing trend of employee share schemes, as well as the government's programme of privatisation.

To this end, he began a programme of tax cuts and investment reforms designed to allow people to keep more of what they were earning, and encourage them to invest their money. He announced the creation of the personal equity plan (PEP) which would allow members of the public to "shelter" from tax of up to £2,400 per year in stocks. The basic rate of income tax was reduced from 30% to 29%, the first cut in income tax since 1979, while other tax changes were also announced. Capital Transfer Tax was renamed Inheritance Tax, and the tax levied on gifts given during a deceased person's lifetime was abolished (unless the gift was given in their final year of life). Tax relief for charity donations made by companies or individuals, described as "Give as you Earn", was announced. Duty on a packet of 20 cigarettes was increased by 11p, while duty on petrol was raised by 7.5p per gallon.

In his speech Lawson said that social security changes being brought in that year, principally the replacement of Family Income Supplement by Family Credit, world save £120 million in the 1987–88 financial year.