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; request a free guide on NISAs from Hargreaves Lansdown
- 1 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 2 Expert urges cat lovers to own just one animal each
- 3 Sainsbury's '50p challenge' poster telling staff to encourage customers to spend more placed in shop window instead of staff room
- 4 Yes, the iPhone 6 is a miracle, but it's Apple's tax affairs that deserve a double take
- 5 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
Day In a Page
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location