Budget 2011

by admin on May 11th, 2011

Who can expect to be ‘worse’ off following George Osborne’s Budget?

There were few measures announced to help prudent savers, struggling to protect their money against low interest rates and rising inflation. The Chancellor indicated that inflation, as measured by the Consumer Price Index, is likely to remain between 4% and 5% for the rest of 2011.

Pensioners will not benefit at all from the changes announced to the personal allowance increase, as they already receive a higher personal allowance and this has not been increased. Currently those aged between 65 – 74 don’t pay tax until earnings exceed £9,490, rising to £9,640 for those aged 75 and over.

Higher earners
Mr Osborne announced that the 50p tax rate is temporary and a review will take place to see how much is raised each year from this. Those earning over £150,000 look set to continue paying this top rate of tax for the foreseeable future. In addition those in this tax bracket won’t benefit from the biggest tax giveaway – the raising of the personal allowance, both this year, and next. This is because the personal allowance starts to be withdrawn once earnings top £100,000 and disappears
altogether when income reaches £115,000 a year.

The Chancellor announced a crackdown on tax loopholes which also includes avoidance of stamp duty on the most expensive properties.

In addition, there will be a tightening of the Capital Gains Tax rules, and the practice which sees some highly paid employees offered interest-free loans from their companies in exchange for taxable earnings.

In future tax thresholds will continue to increase with inflation each year, but this will be linked to the lower Consumer Price Index rather than the Retail Price Index. This means these tax thresholds will increase at a lower rate.

Public sector workers
The Chancellor indicated that public sector workers can expect to pay an average of 3% more a year for their pensions in future. Later retirement dates and a switch to a career average scheme, are likely to be worth less for many people. This is on top of the additional 1% National Insurance Contributions all employees pay from 6th April this year.

Those with large estates
As expected Mr Osborne announced there will be a review of the Inheritance Tax laws, unexpectedly though, rather than clamping down on wealthier estates that can effectively avoid death duties through trusts and careful tax planning.

Smokers and drinkers
Tobacco prices up 2% above inflation and 5p to added to a pint of beer.

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