What the latest Budget means for you

What the latest Budget means for you

author: HaylexCox

By HaylexCox

There are winners and losers in every Budget announcement, and this time chancellor George Osborne has declared the winners to be the "makers, savers and doers" of Britain.


But while politicians argue over the benefits of cutting a penny from the price of a pint of beer, or slashing bingo tax, what we really want to know is how the changes will affect our own budgets day to day.

Savings

One of the headline announcements from the Budget was the decision to raise the tax threshold on savings accounts to almost triple its current level. Money stored in ISAs accrues interest, which is a form of income that can be taxed. Under current rules, up to £11,520 can be invested in a combined cash and stocks and shares ISA each year without tax being paid - but only half of that amount can be put into a cash ISA alone. The new rules will allow up to £15,000 to be invested in ISAs tax-free - either all cash, all stocks and shares or both.

Obviously this is a significant increase, and savers' campaign groups are delighted at the news. For anyone planning their financial future, it also makes using an ISA a more attractive proposition.

The Personal Allowance

A certain amount of your income is protected from tax, and this is known as your Personal Allowance. The Budget announcement confirmed that from April 1st, this allowance will rise from £9,440 to £10,000. This means that a single person with an income of £20,000 can expect to see an extra £137 in their pay packet over the course of the next year, or just over £11 per month. The Chancellor also pledged to raise the Personal Allowance again, this time to £10,500, from April 2015.

Tax thresholds

Also changing is the threshold for moving to the higher Income Tax bracket. While the Chancellor's decision to raise the tax threshold from £41,450 to £41,865 next month - and then by a further 1% to £42,285 next year - will only affect a small number of people, to those few it will make an enormous difference, leaving them at the basic tax rate of 20%, rather than paying the higher banding of 40%.

Pensions

Mr Osborne's description of the Budget pension forms as "radical" is actually fairly accurate: pensioners will no longer be forced to buy an annuity and can even take their full pension pot in cash, should they choose to. This provides a great deal more flexibility for those entering retirement, with the reassurance that pension savings can more easily be used as a financial safety net, should the need arise. However, the one snag is that the age at which pensions can be accessed is to go up from 55 to 57 from 2028. This means that anyone currently aged 40 or under will have to wait a bit longer before they can cash in their pension pots.

Other highlights

Families earning under £150,000 received a boost, with the government strengthening the proposed childcare funding scheme, due to start in autumn 2015. The scheme will give around 1.9 million parents the equivalent of the basic tax rate on what they have spent on childcare costs, and the eligibility ceiling has now been raised to £10,000; this means working parents could get up to £2,000 per child from the government.

One of the major problems for household budgets in recent years has been the rising cost of utilities, and here the Budget offered less optimism. While a £7 billion package will see energy costs cut for businesses, the benefit to households is thought to be as little as £15 per year - a small drop when compared to the above-inflation increases bill payers have had to endure.

Long-term growth?

While aspects of this Budget undoubtedly help the average working Briton with their financial prospects, critics of the Budget have called it "short-term", with the government looking for quick wins ahead of a 2015 general election.

Only time will tell in that respect, but to really ease the pressure on households this Budget needs to encourage the economic growth required to create jobs and encourage wage growth, putting more money in people's pockets rather than just helping them stretch their money further. 

Disclaimer: All information and links are correct at the time of publishing.

author: HaylexCox

By HaylexCox

BACK TO BLOG HOME
What the latest Budget means for you What the latest Budget means for you