Budget 2014: What to expect from George Osborne's speech
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Personal Finance Editor
Tuesday 18 March 2014
So George Osborne’s advisers will have scrutinised his 2014 Budget proposals. Will they deliver a much-needed boost to the electorate? Will there be positive news for Britain’s pensioners? Or will he save the best changes until next year’s pre-election Budget? The latter seems a certainty, so what can we expect this year?
Extra help for childcare
For starters we expect that there will be extra help for childcare. Osborne is expected to announce a new measure for working parents which will give them a tax break of up to £1,200 per child. What would be the effect of this move? It would mean that working couples would effectively not have to pay basic-rate tax on the first £6,000 they spend on nurseries, nannies or childminders. What about single parents? That’s not part of Osborne’s thinking, it seems. The scheme will, apparently, only apply to household in which both parents are working.
Increase in the personal tax allowance
Even the much-trailed proposal to increase the personal tax allowance to £10,500, rather than the already announced rise to £10,000, will not make a lot of difference to hard-up single parents, according to children’s charity Barnardo’s. It reckons that an average poor, lone-parent family will gain just £74 per year from the measure due to a design flaw in how tax links to Universal Credit. However, it’s worth bearing in mind that when the Coalition came to power in 2010, the personal tax allowance was £6,475 for those under 65.
Increase in National Insurance threshold
Of more interest – and potential financial help - to all is the rumour that National Insurance could be increased to match the Personal Tax Allowance. If that doesn’t happen the primary threshold for employees will rise from its existing level of £7,755 to £7,956, while the upper earnings limit will climb from £41,450 to £41,865.
Rise in the Isa allowance
We already know that the Isa allowance – the amount you can stash in a tax-free savings account – will rise by from £11,520 to £11,880 for stocks and shares ISA and from £5,760 to £5,840 for a cash ISA from 6 April. Meanwhile the junior Isa allowance will go up from £3,730 to £3,840. Calls for the annual Isa limit to be increased to nearer £20,000 will almost certainly be ignored by the Chancellor.
Good news for pensions
There have been many rumours circulating about planned changes to the existing state pensions system, but none looks likely to be introduced this year. At best the Chancellor is likely fiddle around the edges of the pension system, with maybe a small sop to those with tiny pension pots - in that he may increase the so-called "trivial commutation" rules, which restrict those converting their savings into cash to those with just £2,000 in their pots. But experts have called for the limit to be raised to £20,000 to help those otherwise forced to buy annuities, which – given low rates - yields them a desultory retirement income.
Cigarettes and alcohol duty
On a more prosaic level, what about the duty on booze and fags? It usually rises by two per cent more than inflation and this year it’s predicted the duty on wine will go up by 12p and spirits by 48p. Meanwhile smokers will be hit with a 28p rise for a pack of 20 cigarettes and 25 grams of roll-up tobacco.
Changes to the 40 per cent tax threshold
Will the 40 per cent tax rate threshold be raised? The rate currently kicks in at £32,011 of taxed income, but that is planned to fall to £31,866. Meanwhile the personal allowance is climbing, from £9,440 to £10,000. Putting the two together means the amount you earn before being hit by 40 per cent tax will climb from just £41,451 to £41,866. This still leaves many more paying 40 per cent tax than before the current government came to power. I reckon the Chancellor will introduce a vote-winning change to the threshold in his pre-election Budget in March 2015.
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