Income tax: Help for the poor now - and for the rich in time
Lower tax threshold raised but Osborne indicates 50p tax rate will not survive
With a little bit of tinkering with the tax thresholds, the Chancellor has achieved a political juggling act. On the one hand, raising the lower tax threshold is a decent sop to the Liberal Democrats – it was one of the cornerstones of their election manifesto. Meanwhile he has signalled he hasn't forgotten the traditional wealthier Tory supporter by setting up a consultation to scrap the 50 per cent tax rate.
Mr Osborne announced that the latter was a "temporary measure". That's a clever move to keep his voters happy as the implication is that he will ease their pain as soon as he can. It also gives enough notice to the wealthy for them to "manipulate the timing of their income to their best advantage", as Tony Bernstein, senior tax partner at HW Fisher & Company put it.
What's likely is that the consultation period on the 50 per cent tax rate will last long enough to allow the Chancellor to get rid of the rate before the next election in a headline-grabbing and vote-chasing move.
That's not to suggest that Mr Osborne's tax threshold changes are pure political posturing. In fact scrapping the 50 per cent tax rate could make economic sense, according to Richard Jordan, of specialist law firm Thomas Eggar. He said the introduction of the rate was a political gesture by the previous government.
"Alistair Darling conceded that no science or calculation had been carried out prior to arbitrarily choosing the figure of 50 per cent," Mr Jordan said. "This was the tipping point as the higher-end tax payer moved to a mind set where they were working more for the government than for themselves.
"The Government knows that the path to growth is to cut the tax rate again, but politically the environment is not right. I suspect the tax take has fallen and that this is, and always was, a political gesture rather than a sensible economic one," said Mr Jordan.
Looking more closely at the detail of the changes, the headline is that the tax-free personal allowance for under-65s will increase by £630 to £8,105 in April 2012. That's on top of the already-announced £1,000 increase in the allowance to £7,475 from 6 April this year.
The Government's aim is for those earning £10,000 or less a year to be exempt from paying income tax altogether by the end of the current Parliament. But that doesn't necessarily mean, that the raising of the threshold will benefit all that many.
The Treasury claimed the move was good news as next year's allowance change will reduce the tax paid by 25m people by an average of £48, while some 260,000 people on low incomes would be taken out of the tax net altogether. The Chancellor also said that the Budget would not draw more middle earners into the higher-rate band.
But around 750,000 middle earners are already due to pay 40 per cent tax for the first time from April as a result of fiscal drag. At the same time they're facing the burden of the already-announced one percentage point increase in National Insurance contributions.
Meanwhile, in a rather sneaky move, the Chancellor said the default measure for increasing direct tax thresholds and bands will be the Consumer Prices Index (CPI) from 2012, rather than the higher Retail Prices Index (RPI). The switch could mean all paying more into the Treasury coffers as they are drawn into higher tax bands.
"The linking of personal tax rates and thresholds to CPI rather than RPI from 6 April 2012 could result in a reduction in the real value of allowances and tax thresholds for everyone in the future," warned Greg Limb, partner at accountants KPMG.
'Osborne seems to be targeting the right people'
Jeff Romeo is a public relations consultant and lives in West London with his wife Romanee Romeo and their children John, three, and Lilla, one.
Savings Some, but looking to become first-time buyers
Car expenses None
"Lowering or even slowing the rise in the price of fuel will be a great help for my wife and I. We got rid of our car a while ago because it was just too expensive but we are planning to move out of London, meaning we would need to get one again.
"If George Osborne delivers on his promise to crack down on tax avoiders, I will be pleased. You shouldn't be able to call yourself British if you don't pay taxes in this country, whoever you are. These people should be paying the most tax of anybody, not avoiding it. I find tax avoidance disgusting.
"I have dual citizenship so I pay here and in the States, which is fair.
"A lot of people will be pleasantly surprised by what has been announced, the Chancellor has done relatively well.
"Some were expecting this budget to really hurt but he seems to be targeting the right people."
'None of this is tackling the real problems'
Elizabeth Barnes, 23, works at a florist and lives with her four-year-old son Josh in Maidenhead.
Income £22,000 pa
Outgoings rent of £1,000 month, plus childcare costs
"Osborne is quibbling with little gifts here and there but none of it is enough to tackle the real problem. I drive a lot, so, yes, any freeze or reduction in the price of fuel will help but it is small fry when we are in such a huge amount of debt; the Government is just going for votes.
"I don't think there will be a big enough effect on enough people. My largest expenses are on rent and childcare, neither of which are greatly affected by the Budget. The only potential positive is the shared equity scheme to help first-time buyers. If I could afford to get a foot on the property ladder, I would be able to avoid paying extortionate rent.
"They are right to put up the prices of tobacco. Even as a smoker – or at least as one who knows she shouldn't do it – I would like to see more people encouraged to give up. I would like to give up cigarettes myself and hope this will act as a spur."
'They give with one hand and take with the other'
Pat Ankrah, 53, lives in Manchester. She is employed as a social worker and has four children, three of whom live independently.
Savings Some but not significant, bought a house in France instead
Car expenses One car, used every day for work
"The changes to the fuel charges seem excellent to me. Due to my job, driving costs me around £50-a-week, so this could make a real difference to my living costs.
"In my job at a hospital I see the effects of alcohol on youngsters every day.
"The freeze on council tax sounds good but at the end of the day, it all depends on how much we are going to get in our pocket after all of this.
"I never feel very positive about these changes as I think the government just gives with one hand and takes with another.
"I'm sure there will be cost increases in other places even as there seems now to be reductions."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Questions of Cash: What are my rights if my leak is caused by neighbours’ roofs?
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
10 tips for taking out a personal loan
Bargain Hunter: Win a Bentley competition to be driving in a winter wonderland
Bank-beating exchange rates on your international payments
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Douglas Carswell tells Ukip to stop blaming foreigners as youth poll shows Nigel Farage is even less popular than Nick Clegg
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
Day In a Page
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
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