BUDGET 22.06.2010 – What it means to you!
The new coalition government’s first budget seems to have been a little less harsh that we were being led to expect. There is little doubt that something needs to be done to deal with this country’s budget deficit and this means saving money or raising revenue wherever it is possible.
The main issues that will affect you are:
An increase in your personal income tax allowance by £1000 from April next year. This will mean an extra £3.85 per week in your pay packet. Whilst this looks attractive on the face of it, Class 1 National Insurance contributions will increase by 1% and eat into the £3.85.
VAT will increase to 20% from 4th January 2011. If you spend £50 per week on fuel alone, this increase will cost you a further £1.06 per week. Food, children’s clothes, books and newspapers remain exempt and the reduced rate on fuel bills stays at 5%. Food costs are likely to increase due to the increased costs of getting the goods to the shops.
A council tax freeze for 2011-2012 so at least you will have certainty on your council tax bill for next year.
Capital Gains Tax rises from 18% to 28% for higher rate taxpayers. This will affect you if you make a gain over £10,100 from the sale of assets in any one year. The main residence exemption remains but anyone selling a second property who is a higher rate payer will find themselves paying an extra 10% tax on the gain.
- Fuel, Alcohol and Tobacco duties remain unchanged – remember – they only went up in March anyway!
- Inheritance Tax allowances and rates remain unchanged
- Stamp Duty Land Tax remains unchanged. This, combined with the large number of properties expected to come onto the market from higher rate taxpayers with second properties should see some buoyancy in the conveyancing market. If you are buying a house expect there to be a large number of properties to choose from and for prices to come down. If selling, you may find yourself receiving offers well below what you anticipated selling your house for.
- Public sector pay freeze for those earning in excess of £21,000 and increases of at least £250 per annum for those earning under £21,000. This is could spill over into the private sector as well leading to widespread wage restraint.
- Welfare reforms include an overhaul of the benefit system generally with special attention paid to Housing Benefit and to Disability benefits. Tax credits for families with household incomes above £40,000 will be reduced.
- If you thought that you were retiring at 65 – think again. The state retirement will be raised to 66.
There are other more specialised changes that will affect a small portion of the population which are outside the scope of this blog. However, if you have any queries please contact us.
