Family finances: Take action now, or you could lose out
A review of your family's finances may be needed. David Prosser offers a checklist
Saturday 24 March 2007
Not all Budget measures take effect automatically. While you can't escape much of what Gordon Brown announced on Wednesday, there were all sorts of measures that will only affect those who take advantage of them - or who don't take evasive action.
Brown claimed that four in five households would be better off as a result of the tax and National Insurance measures he has proposed for the next three years. But that assumes that families claim the tax credits the Chancellor is offering - and many currently don't.
In particular, four in 10 people entitled to the Working Tax Credit have not claimed the money. Broadly speaking, if you earn less than £15,000 a year you are very likely to be able to claim. If you earn more, check your entitlement (information from www.hmrc.gov.uk/individuals).
The take-up for Child Tax Credit is much better, at about 90 per cent. It is available to nine out of 10 families. Parents with household incomes of up to £58,000 a year are eligible to claim (£66,000 for families with a child under the age of one).
The Budget small-print confirmed a measure mooted in the Chancellor's Pre-Budget Statement in December. Currently, savers who buy life insurance within a pension - even if they make no other pension contributions - are entitled to tax relief on the premiums at their highest rate of tax. This benefit has now been abolished.
If you've already taken out pension term assurance, as the benefit is technically known, take care. You're entitled to continue claiming the tax relief, but accountants Wilkins Kennedy warn that changing the terms of your policy could jeopardise that. Peter Goodman, head of tax, says: "As soon as they decide to vary their policy by increasing payments or lengthening its term, they will lose the tax breaks for all their payments into the policy."
Savers who pay into a private pension plan other than a guaranteed final salary scheme may need to boost their contributions from next April. The cut in the basic rate of income tax means many people will end up paying less into their retirement savings.
This is because pension contributions attract tax relief at your highest marginal rate of taxation. If you're a basic-rate taxpayer, paying in £100 now costs you just £78, because the Government offers a top-up of 22 per cent, the basic rate. From next year, the basic rate falls to 20 per cent. If you don't make up the difference, your pension will be smaller than expected.
The Chancellor announced good news for thousands of people with holiday homes overseas. People who bought their homes through a company are affected. Until now, homeowners have faced a tax bill on the rental value of their homes, as they are considered to be receiving a benefit-in-kind from their companies.
The Chancellor said no such tax will now be payable. People who have been paying tax - and not all holiday-home owners have declared their properties to the taxman - may be able to claim a refund. Seek advice from your accountant.
Richard Mannion, a tax partner at Smith & Williamson, says holiday-home owners must satisfy four conditions to escape tax: "The company must be owned by individuals; it must exist to own the property; it must not have other assets; and it can't be funded by another company."
The overall annual allowance for investments in tax-free individual savings accounts (ISAs) will rise to £7,200 next year. Within that, you'll be able to save £3,600 in a cash ISA, £600 more than currently. The increases are small, but still worth taking advantage of.
One other Budget wrinkle is that unit trusts investing in property are to get a new tax break. They'll no longer have to pay tax on returns from properties within their portfolios, which should boost the returns available to savers.
More cash for greener homes
* One area where more money is definitely available following the Budget is for people who want grants to help with the cost of installing renewable energy systems - such as solar panels or windmills - in their homes. The Chancellor promised to increase the funding for these grants from £12m to £18m a year.
* However, if you want to apply for this money, which is released in tranches each month, you will need to act quickly. When the most recent funding window opened this month, the grants sold out in just 75 minutes - so even though half as much money again is now available, you'll still need to be quick.
* Full details of how to claim the grants are available from the Energy Saving Trust (0800 512 012; www.est.org.uk) or the Low Carbon Buildings Programme ( www.lowcarbonbuildings.org.uk). April's allocation of money has been cancelled while the organisations work out how to channel the new funding, so the next grants won't be available until May.
* David Rothenberg, of accountants Blick Rothenberg, says Gordon Brown's plan to exempt "carbon-neutral homes" from the first £15,000 of Stamp Duty is pretty useless.
* "To satisfy the requirements the house must generate sufficient renewable energy to run appliances in accordance with a pre-determined scale based on the size of the house," he says. "Whether wind power or solar, the likelihood is that the cost [of installation] will be about £18,000 - the cost will always exceed the Stamp Duty saving."
- 1 I was a Woman Against Feminism too
- 2 Fifty Shades of Grey movie trailer released: First look at Jamie Dornan as Christian Grey
- 3 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 4 Students offered grants if they tweet pro-Israeli propaganda
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
iJobs Money & Business
£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...
competitive: Progressive Recruitment: This really is a fantastic chance to joi...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
Day In a Page
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
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar