Small businesses also get 1p tax increase lifeline.
Chancellor Alistair Darling has cut VAT from 17.5% to 15% in his pre-Budget report, announced today.
The cut will come in to effect on Monday until 2010, when it is expected to return to current levels.
Top rate tax is increasing to 45% from 2011, for people earning more than £150,000 a year.
The 1p tax increase for small businesse that was set to be introduced next year has also been suspended by Darling. It was due to rise from 21% to 22%.
The government is injecting an extra £20bn into the economy, or 1% of GDP, from now until April 2010 as the chancellor predicts the UK economy will fall to 0.75% from 1.75-2.25%.
