Thursday, 24 March 2011

Thanks George

Yesterday was Budget Day for the UK.  At  12.30pm, George Osborne stood up in the House of Commons and delivered his budget speech.  All the tax changes and personal allowance rises, etc, that have been hinted at by the press became real (by "hinted" I mean embargoed until 12.30 but they couldn't keep their mouths shut).  In the UK, the new tax year starts on 6th April so the effects won't be long in coming.  On a personal tax front, this is what will affect me directly:-

  1. Fuel duty went down by a penny.  
  2. Employees' National Insurance went up - that's the "con" tax which pretends it's our social security tax but actually just goes into the general tax pool.  The chancellor announced he is going to consult on merging NI with income tax.  About bloody time too.
  3. The tax free personal allowances goes up by £1,000 from 6th April BUT the band where you start to pay higher rate (40%) tax drops by £2,400, so anyone earning over £42,475 is immediately worse off.

I feel most aggrieved about the drop in the banding for higher rate tax.  When you think about it in context,  £42.5k isn't that high a salary: the average salary in London is £31k;  the average house price in the UK is £180k; the average council tax on that house is £1.5k;  the average car costs more than £10k; and an outer London zone 5 annual travelcard is £1,880.  This isn't the first time games have been played with the 40% tax band - when I started working in tax, the higher rate kicked in at about £37k; 20 years later, while average salaries have more than doubled, it has barely moved.  If it had risen at the same rate as inflation (which is what the bands were meant to do), then it would be over £50k.

As for me,  I expect to be £20/month or £230.93 per annum worse off. That's what the BBC's budget calculator  tells me

- Pam (more belt tightening)

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