Are you a pre-Budget winner or loser?

25-11-2008

Are you a pre-Budget winner or loser?
Alistair Darling's Pre-Budget Report saw rises in national insurance contributions, increases in personal tax allowances for some, the loss of personal tax allowances for others and the headline grabbing VAT cut – but will you be better off?

Labour claims those earning under £40,000 will be better off because of the measures, but the Conservatives says all those earning over £20,000 will be worse off.

How will the pre-Budget report hit your pocket?

Under the chancellor's plans, we will see short-term tax cuts – with the hope of boosting the economy – paid for by long-term tax increases to pay for it all.

Data from KPMG show someone earning £10,000 a year will be £118.80 better off in 2009/10 and 2010/11, and £215.58 better off in 2011/12.

Figures from Deloitte show someone earning £40,000 will be £100 a year worse off, from 2011.

Someone earning £44,000 will be £32 a month worse off.

The £600 increase in the income tax personal allowance announced in May 2008 will become permanent with a further increase of £130 – putting it at meaning basic rate taxpayers pay £145 less tax a year in 2009-10.

KPMG estimates someone earning under £27,424 will be better off, those earning under £40,000 will be the same.

Bill Dodwell, head of tax policy at Deloitte, said: "The Chancellor has delivered a road map for tax reductions now, followed by tax increases in 2010 and 2011.

"We shall all start paying for the tax reductions in 2011, assuming the government is re-elected."

Tax rises to come include a rise in National Insurance contributions of 0.5 per cent in 2011, although the level at which National Insurance is paid will increase to match the new income tax personal allowance.

Higher rate taxpayers will see personal allowances cut (for those earning over £100,000) and eliminated (for those earning over £140,000).

For those earning over £150,000, there will be a new 45 per cent rate.

"In the meantime, the government's message is 'spend, spend spend' at least for the next 13 months, to benefit from the reduced 15 per cent VAT rate," Mr Dowell said.

Carolyn Steppler, associate partner at KPMG in the UK, explained the new 45 per cent top rate of tax will not be the only tax hike.

"Many more lowly earners will also end up paying more tax," she said.

"Whilst the increase in the personal allowance and NI lower earning contributions will save somebody earning £30,000 a year approx £118 now, this will be wiped out by the 0.5 per cent National Insurance increases from April 2011."

She added: “This is a classic case of jam today, dripping tomorrow.

"Many people will feel mildly better off through the reduction in VAT (though even there, if you drink, drive or smoke it will be clawed back), but it will be payback time in April 2011."

Bookmark with:
Bookmark with: Digg Digg Bookmark with: Del.icio.us Delicious Bookmark with: Reddit Reddit Bookmark with: StumbleUpon StumbleUpon Bookmark with: Google Google Bookmark with: Technorati Technorati Bookmark with: Netvouz Netvouz

Latest News:

Search News
News Front Page
Accountancy / Tax
Advertising / PR
Armed Forces
Automotive
Aviation / Aerospace
Banking / Finance
Charities / Voluntary
Childcare / Youth
Construction / Property
Customer Services
Education / Training / Teaching
Emergency Services
Engineering / Electronics
Entertainment / TV / Theatre
Graduate Roles
Health / Beauty
Hotel / Catering / Restaurants
HR / Recruitment
Insurance / Pensions
International / Overseas
IT / Internet
Legal
Management / Business
Manufacturing / Industry
Media / New Media / Creative
Medical / Healthcare
Pharmaceutical Industry
Public Sector
Retail / Wholesale
Sales / Purchasing / Marketing
Science / Technology
Secretarial / PA / Admin
Skilled / Semi-skilled Manual
Telecommunications
Transport / Logistics
Travel / Tourism / Leisure