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.

And not without good reason as the increase will burden all of us with more taxes to pay for everyday items at a time when many of us have already been forced to make cutbacks through low wages and unemployment over recent years.

We all know that we face a tough few years ahead but at present it is difficult to see where any growth in our economy is likely to come from.

Professor Phillip Booth, Editorial and Programme Director at the IEA, said that the move is the result of insufficient attention being paid to spending cuts.

He believes that the VAT rise is simply bad economics and important potential spending savings have been avoided for transparently political reasons.

“Government spending, despite the Chancellor’s proposed savings, needs to be cut further. We did not get ourselves into the current situation because taxes were too low but because government spending rose out of control. Ring-fencing the NHS budget whilst simultaneously increasing the foreign aid budget, for example, are simply indicative of politically-motivated profligacy and not good economics. Furthermore, proposed increases in pensions above the rate of inflation and the retention of quirks such as free bus travel and the winter fuel allowance cannot be justified given that they have led to the necessity to increase VAT.

If the government insists on increasing taxes, there are better candidates than a general VAT rise. However, today’s news should be a wake-up call that the spending cuts are insufficient. If the government wishes to prevent growth from stalling, it will cut spending further, not burden the population with an unnecessary tax rise.”

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 IEA are particularly at odds with the Conservative party over the issue, David Cameron’s party have not only shown support for the idea emanating from France and Germany, but also believes that the UK should take the lead in implementing the levy.

Indeed the idea has the backing of all the UK parties and given the situation that the financial crisis has caused to the general public the bank levy will also appeal to most of the electorate.

The average man on the street would love to see banks in the UK operating under stricter governance and guidelines, but the IEA point out that this is not necessarily the best move and the benefits from adopting such a policy are far outweighed by the drawbacks.

Mark Littlewood said;

“Britain needs to decide whether we want an economic recovery or not. If we do then we need to realise that it will only happen if we value the finance that supports private sector growth. The call from France and Germany to introduce an international levy on banks is hardly a positive step in trying to rebuild Europe’s fragile economies. There has been support for this idea from all parties, with the Conservatives even going so far as to suggest that Britain should lead on it, but the cost of the tax to Britain will be far higher than the benefit.

We’ve seen our politicians intervening to try and ‘stimulate’ a recovery, but more important is the kind of culture we create. If we want Britain to become a place that thrives with commercial activity then we need to be seen as a place that values commercial activity, a levy on bankers’ bonuses, discussion of a Tobin tax and now a proposed levy on bank assets all contribute to the message that we don’t want to be the financial hub of Europe and that we do not value cheap, efficient finance for consumers and firms. It’s time we changed our tune.”

But the AA warn that prices will increase further and we may see a record high during April, possibly hitting £1.24p per litre just after the Easter break.

The AA warns motorists;

“Soaring wholesale prices, an increase in duty on 1 April and the end of the subsidy for biofuel producers could push the cost of petrol close to £1.24 a litre just after Easter.”

Petrol prices have risen from £1.1210 per litre in mid February to £1.1609 per liter in mid March.  Diesel prices rose to £1.1687 a litre, up from £1.1384 a month ago.

The increase in fuel prices will have a knock on effect with businesses likely to pass the increase on to consumers as logistics companies are unlikely to be able to absorb the increase.

Instead the Financial Times report says that the 50% tax levied on bonuses over £25,000 is more likely to bring in a more welcoming £2.5billion to the government, after a survey conducted through the UK banks.

While the Treasury could not confirm the Financial Times figures the much needed extra cash would help to payoff some of the Governments record budget deficit and help the UK on the road to financial recovery.

finance minister christine legarde

France are to follow the lead outlined by the UK government in Alistair Darling’s recent pre-budget speech and introduce a special one off tax on banker’s bonuses for 2010.

French Finance minister Christine Legarde has said that a bill will be put before the French parliament in January that will commit tax bonus payments of over 27,000 euros, to fifty percent taxation.

The French government had indicated last week that a similar tax to that announced by the UK would be announced, but no further details were available at that time.

Germany’s Chancellor Angel Merkel has said that she is sympathetic to the idea but fears that it may be against German law.

making ends meet

The findings of a survey conducted by Broker Execution Ltd has revealed that Britons expect to spend less on presents this Christmas than they did last year, with fears of unemployment, higher taxes and utilities and recovery from the recession among the many worries high on the agenda for the general public.

The survey which was conducted at the end of October says that on average consumers will pay out £358 on presents alone this Christmas, showing a fall of 4% on figures from this time last year.

Around half of those surveyed expected to spend much the same as last year, 40% said they would spend less than last year and 10% say they will be spending a lot less.

The survey concludes that while the fears of extra taxes and unemployment continue to be a real risk, more of us are concerned with cutting back spending, increasing savings and reducing debt during these hard times.

There are still many families struggling in the UK with a mountain of debt and Christmas for them will be a time of further hardship. There are now plenty of companies offering credit counselling which could reduce the heartache and help get back on track financially.

Source: Reuters

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).