Simon Read: We're not all in it together, some will suffer much more
Saturday 26 March 2011
The tough times look set to get worse for Britain's hard-up families following the Chancellor's Budget statement on Wednesday. His commitment – sorry, the Lib Dem's commitment – to raising the personal tax threshold to £10,000 within this Parliament is laudable. But let's not forget that next month's £1,000 increase in the threshold – announced in last June's emergency Budget – wasn't matched by a similar rise in the 40 per cent taxpayer level.
That narrowing of the tax band leaves higher rate taxpayers £80 worse off. "This is a significant cut in the basic rate tax band and is the main reason for the substantial increase in the number of higher rate taxpayers," points out Stephen Herring, of accountants BDO. "Those earning £42,475 will face from next month 40 per cent income tax rate although they earn less than twice median earnings."
But they're not the only ones hit. The move to switch the default measurement for increasing tax thresholds from the Retail Prices Index (RPI) to the lower Consumer Prices Index (CPI) will mean we will all, effectively, pay more tax in the future.
Experts have calculated the change – which will affect National Insurance and capital gains tax from next year – could cost families around £27bn in the next five years. "Switching to CPI is a clandestine way to raise tax," according to Nicola Roberts, tax director of accountants Deloitte. "Most people won't understand what this change in the inflation rate means or the corrosive effect it will have on their earnings and benefits."
Switching the starting level for paying National Insurance from RPI to CPI, for instance, will mean the level won't rise so quickly, drawing more workers into paying the tax. It's calculated that an extra 40,000 low-paid workers will be paying NI next year alone because of the use of the lower inflation measure.
Savers will be hit too as the annual tax-free ISA allowance will be hit. At present it's linked to RPI but the switch to CPI will mean the allowance will climb much less. For comparison the current rate of RPI is 5.5 per cent while CPI – which excludes property prices – is only running at 4.4 per cent.
Pensioners have also been hit by the move as state pension increases – formerly linked to the rate of RPI – have already been switched to CPI. The cutting of the winter fuel allowance could prove even more catastrophic for some elderly people: the number of winter deaths every year is already rising alarmingly.
Of course some people will benefit from the Budget changes, but the news is bleak for most. But what else did you expect?
There was a consumer victory last week for a car crash victim who had been hounded by an insurer for the partial return of a £3.4m payout he'd had. Dorset man Mark Noble was accused of lying about the extent of his disabilities at a trial to determine compensation. But after he was awarded the cash, his insurer Direct Line was tipped off that he was not as seriously disabled as he had claimed in court.
The insurer rightly investigated the claims and its undercover surveillance suggested that it had a case. But the judge disagreed and accepted Mr Noble's argument that the fact he had done better than expected following the conclusion of the first trial did not mean he had lied.
I'm pleased for him, but worry about the implications of the trial. Insurance fraud is a big problem that needs dealing with properly.
Savings: The wrong kind of inflation?
in a week when inflation (CPI) was reported to have hit 4.4 per cent in February, the Chancellor started talking about the "wrong sort of inflation". But inflation has simply been too high for too long, says Andrew Hagger of Moneynet.co.uk. "Savers have suffered a double blow of low interest rates and high inflation for two years now," he says.
Basic-rate taxpayers need to earn a gross return of 5.5 per cent on savings just to retain their spending power, while higher-rate taxpayers need a massive 7.3 per cent. So there's been some interest in Birmingham Midshires' new inflation-linked savings products offering the choice of a five-year or three-year inflation bond with the rate based on RPI plus 1.5 per cent or 0.75 per cent.
The bonds look appealing as they are paying 2 per cent above the best traditional fixed-rate bonds once the bonus is taken into account. But the interest rate is based on April's RPI rate, so interest will depend on the RPI figure in April 2012, not the 5.5 per cent as it stands now.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
- 1 Video of Irish 'professional boxer' fighting Istanbul neighbourhood goes viral in Turkey
- 3 Toby Sheldon: Justin Bieber lookalike found dead in motel room
- 4 Russia 'accidentally reveals' number of its soldiers killed in eastern Ukraine
- 5 Pregnant teenager Neysi Perez 'wakes up in coffin' a day after her funeral
Dresden riots: Protesters in Germany attack refugee buses shouting 'foreigners out'
France train shooting: US soldiers speak of the moment they stopped gunman and 'beat him until he was unconscious'
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...
£25000 per annum + benefits: Ashdown Group: A large financial services company...
£20400 per annum: Ashdown Group: An established and highly reputable organisat...
£20000 - £100000 per annum: Recruitment Genius: We are a successful and establ...
Day In a Page
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.