Tax
Income tax
* From April 2012 personal allowance will increase by £630 to £8105.
* This increase won’t be restricted to basic rate tax payers so no one else will be pulled into the higher rate tax band.
* The 50% tax rate will be reviewed and potentially removed if it has not generated sufficient revenue.

National insurance

* Income tax & National Insurance may be merged to a single tax if it is viable to do so.
* However, this will not result in pensioners having to pay National Insurance.
* The 1% National Insurance increase scheduled for April 2011 will go ahead as planned.

Inheritance tax
* The Inheritance Tax Rate will be reduced by 10% for anyone who leaves 10% or more of their estate to charity.

Other tax
* From April 2012 the thresholds for Income Tax, National Insurance, ISAs and Inheritance Tax will increase by the CPI measure of inflation instead of by RPI.
* Taxes on owners of high value property will be reformed.
* Measures to clamp down on tax avoidance will be introduced.
* Income tax relief on the Enterprise Investment Scheme will increase from 20% to 30% in April, 2011.

Housing
First time buyers
* £250 million commitment has been made to help first time buyers.
* A new shared equity scheme – First Buy – will help 10,000 families to purchase a new build home.

Mortgage Support
* The Support for Mortgage Interest scheme will be extended for another year.

Council tax
* Every council across the UK has agreed to freeze council tax for the coming year.

Water bills
* Public money will be used to help cut water bills for customers in the South West of England.

Alcohol & Tobacco
Alcohol
* A reduced rate of tax will apply to low strength beers from 1st October, 2011.
* A higher rate of tax will be applied to high strength beers from this date.
* There will be no change to any other alcohol duty rates.

Tobacco
* Tobacco duty rates to increase by 2% above inflation.
* Tax on hand-rolled tobacco will increase by an additional 10%.

Transport
Fuel
* Fuel duty will be cut by 1p a litre from 6pm today (23rd March, 2011).
* The planned 1p increase in fuel duty scheduled for April will be pushed back a year.
* The subsequent inflation-linked rise scheduled for April 2012 will be pushed back until the following summer.
* A Fair Fuel Stabiliser will be introduced from tomorrow – fuel duty will go down when fuel prices increase, & go up when fuel prices fall.
* The fuel duty escalator will be scrapped for the rest of this Parliament.
* A rural fuel duty scheme will be piloted.

Approved mileage allowance
* Approved mileage allowance payments will increase to 45p a mile for the first 10,000 miles & 25p a mile thereafter.
* It will also be paid for volunteers travelling as passengers.

Road tax
* Vehicle Exercise Duty will increase by inflation only.

Trains
* £200 million will be invested in regional railways.

Flights
* The planned increase in air passenger duty will be delayed until next year.

Employment & Education
Employment
* A new start up scheme to support entrepreneurs – Start Up Britain – will be launched.
* 21 new enterprise zones will be introduced.
* Entrepreneur’s Relief will be doubled to £10 million on 6th April.

Education
* 24 new university technical colleges will be set up.
* 100,000 places in new work experience schemes will be introduced.
* 50,000 apprenticeship places will be created over the next four years.

Pensions
State pension
* A new, single tier, flat rate pension based on contributions will be introduced subject to a consultation.
* This will be worth approximately £140 a week but it will take years to implement.
* Current pensioners won’t be affected by the change.
* Plans to introduce automatic increases to the State Pension Age have been brought forward subject to review.

Public sector pensions
* Public sector workers will have to increase their pension contributions by approx. 3%.
* The government will consult on scrapping final salary pensions for public sector workers & replacing them with career average pension benefits.

For further information and to discuss your thoughts on the 2011 Budget speech visit the money.co.uk budget special.

The information is supplied by money.co.uk and clearly illustrates how the rich and poor divide in the UK could be set to increase dramatically as various groups face up to the possibility of losing up to 20% of their income.

While some groups stand to suffer a loss in their income others could actually benefit from the cuts.

UK Debt

But there are some areas of the budget that could stand the equity release sector in good stead for the future, Andrea Rozario, Director of Safe Home Income Plans (SHIP), the UKs trade body for equity release product suppliers believes that to be the case and said;

“While the emergency budget did not specifically mention equity release, it did announce a number of measures that have the potential to significantly impact the sector.  Chief amongst these are the increase in VAT from 17.5% to 20% and the review of public sector pensions.

Over 55s in the UK often have a relatively fixed income with spending weighted towards VAT-able products and significant equity in their homes.   The changes outlined in the budget mean that they will suffer from VAT increases eating into their income and then their families will be hit by death duties when they receive their inheritance.   In addition, those people who have been relying on a comfortable public sector pension when they retire could face a nasty shock and will need to seek additional sources of retirement funding.

Equity release would seem the logical answer to many of these issues and we believe that the Government changes will lead to more and more people considering equity release as an integral part of their pension planning.””

Wishful thinking or just plain common sense?

The Coalition has generally, so far been welcomed by the majority of public and businesses alike, but tomorrow Chancellor George Osborne will announce his first budget and the mood is likely to change.

Osborne and the leaders of the government have already made it very clear that they are not prepared to paper over the cracks and hope the budget deficit will disappear, on the contrary, since taking office we have never stopped being warned that the UK is in for a tough ride for the foreseeable future.

The deficit is the single over-riding feature that this government must face and Osborne said in an interview with the BBC on Sunday that he will not allow the country to follow in the footsteps of Greece by ignoring the problem.

He is a man with a plan and says that on Tuesday he will prove that not only can the UK avoid a Greece-like situation, but also prove that the Britain can pay its way in the world.

Tuesday’s budget is expected to be the tightest in at least 30 years, and with public sector job losses and deep pay and benefit cuts expected, the plan is likely to stoke public discontent and strain the fledgling ruling alliance.

Other measures expected to be included in the budget include a bank levy and reform of welfare benefits and public sector pay. It is believed that there are additional plans including  payroll tax breaks for new businesses, a council tax freeze and a review of public sector pensions.

“The deficit reduction programme takes precedence over any of the other measures in this agreement, and the speed of implementation of any measures that have a cost to the public finances will depend on decisions to be made in the Comprehensive Spending Review. We will significantly accelerate the reduction of the structural deficit over the course of a parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes.”

Chancellor George Osborne, who has announced an emergency budget for June 22nd, said he would outline plans on Monday for an initial £6 billion’s worth of cuts.

The coalition has plans to cut Ministry of Defence spending by 25%, while proposing private capital investment in the Royal Mail.

The Accord supports the introduction of a banking levy and the reduction of the bonus culture in the finance sector. Meanwhile it will be interesting to see if the coalition can succeed where the Labour government failed, in getting banks to lend money to businesses.

“There is an urgent priority that is getting lending going to small- and medium-sized businesses. That is an absolute urgent priority,” said Osborne.

The Budget speech comes at a crucial time for the UK  both politically and financially and depending on the upcoming election result we could be going through the whole process again, if the incoming Chancellor decides on implementing emergency fiscal measures.

For now however, the current Chancellor Alistair Darling’s speech will be put under the microscope by financial analysts as well as political hopefuls for the next election and it will be interesting to hear how he intends to strike a balance between tackling the annual public deficit and sustaining a fragile recovery programme during 2010.

S&P Credit Analyst David Beers explained in a statement:

“We have revised the outlook on the UK to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of GDP and remain near that level in the medium term.”

He recognised that the S&P take a more cautious view than the government of  “how quickly the erosion in the government’s revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow.”

The Treasury responded by saying that The Budget had set out a clear plan to half the national debt within five years, a plan that was based on a deliberately cautious view of the public finances.

Sterling took another hit against foreign currency on announcement of the news.

What a mess!

Personal Allowances 2009-10

These remain as announced in the Pre-Budget report November 2008. From the 6 April 2009 the income tax personal and age related allowances are increased to:

Age under 65 – £6,475
Age 65 to 74 – £9,490
Age 75 and over – £9,640

The income limit for aged related allowances (over 65’s) is increased to £22,900.

Blind person’s allowance increased to £1,890.

Personal Allowances 2010-11

The basic personal allowance will be reduced for taxpayers who earn more than £100,000 per annum.

Where an individual’s income is above £100,000 the basic personal allowance will be reduced by £1 for every £2 their income exceeds £100,000.

Income Tax Rates 2009-10

Starting savings rate 10%* – £0 to £2,440

Basic rate 20% – £0 to £37,400

Higher rate 40% – Over £37,400

* There is a 10p starting rate for savings only. If an individual’s non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income.

New 50% Income Tax Rates from 2010-11

From 6 April 2010 a new income tax rate of 50% will be applied to taxable income in excess of £150,000.

Capital Gains Tax 2009-10

The annual exempt amount for individuals is £10,100 (and for most trustees £5,050)

Inheritance Tax 2009-10

The individual IHT allowance is increased to £325,000.

Pensioners Taxback Campaign

From autumn 2009 HM Revenue & Customs will be targeting pensioners who receive the Pension Credit to help them reclaim tax they may have paid in error from bank or building society interest they have received.

ISA’s

2009-10 The ISA limit is increased to £10,200 (up to £5,100 can be saved in cash) restricted to people aged 50 or over.

2010-11 The limit is increased to the same level for all age groups.

Pensions – limiting tax relief at higher rates

From 6 April 2011 the Government intends to restrict tax relief for individuals with an annual income of £150,000 or more. Relief will be withdrawn gradually so that taxpayers earning over £180,000 will effectively achieve a 20% tax deduction, the same as a basic rate tax payer.

Additionally, from 22 April 2009, if the following conditions apply:

1. Your income is over £150,000

2. You make additional contributions in excess of your existing ongoing contributions, and

3. Your total pension contributions in the year exceed £20,000 (including contributions made by the employer).

Then any higher rate tax advantage, on additional contributions above the £20,000 limit, will be subject to a special annual allowance tax charge that will recover tax relief given at above basic rate.

Excise Duty increases

Alcohol Duty – From midnight 22 April alcohol duty will rise by 2%, equivalent to:

1p on a pint of beer
13p on a 75cl bottle of spirits
4p on a 75cl bottle of wine

Tobacco Duty – After 6pm 22 April tobacco duty will rise by 2% which will add 7p to a pack of 20 cigarettes.

Fuel Increases – Duty increases will add 2 pence per litre to the cost of unleaded petrol and diesel from 1 September 2009.

Stamp Duty Land Tax

The present exemption from SDLT of residential property sales up to £175,000 is to be extended to 31 December 2009. After this date the SDLT threshold will revert to £125,000 (£150,000 in disadvantaged areas).

Before Alistair Darling goes down the same route and bearing in mind the awful debt that the country is already saddled with from the governments other initiatives to overcome the financial crisis, it is worth pointing out that car scrapping scheme in Germany has been a phenomenal success.

It has in fact been a victim of it’s own success, boosting car sales by a massive 21.5% in Germany but at a cost to the government of an estimated 1.5billion euros – three times the original estimate!

Let’s make sure that if we are to follow suit, that we first get our sums right.