Rich to rule in Osborne's new tax regime - UK Politics - UK - The Independent

Budget 2012

Rich to rule in Osborne's new tax regime

The Budget was a blizzard of policies and statistics, but what does it really mean? Pensioners, look away now...

Examining the amount of cash we'll be forced to hand over to the Government in the next two years confirms what was not revealed in George Osborne's Budget yesterday, but was blatantly obvious to all. He has simplified the tax regime to give more money to the well-off, while further penalising the so-called squeezed middle and the elderly.

By 6 April 2013, the net result of the Chancellor's tampering with the tax system will mean that those earning above £150,000 a year will be considerably better off, compared to lower earners. Meanwhile pensioner woes will be worsened by the so-called granny tax – the scrapping of the age-related allowances.

The bean counters at Blick Rothenberg have poured over the changes announced yesterday to work out exactly how you'll be affected. You'll find the full details in our Budget supplement, but some Budget figures spring out.

 

High-earners

By next April, anyone who commands an income of £500,000 a year will be cheering an extra £1,431 a month granted to them by the Chancellor. That's almost exactly enough to buy every month a crate of Veuve Clicquot La Grande Dame 1998, which sells for £120 a bottle.

In total those paid half a million a year will be able to toast an extra £17,172 a year.

Coincidentally enough, that's almost exactly enough to pay for three terms at a typical public school, assuming the fee is £6,000 a term. Cynics could suggest that Osborne had specifically targeted the extra cash at champagne-swilling-Tories who educate their children privately.

 

Grey army

At the other end of the scale, the Blick Rothenberg analysis reveals that, when it comes to tax take, pensioners will be worse off. The hardest hit in April 2013 will be well-heeled pensioners aged 75 or over whose annual income is between £125,000 and £150,000.

They will be worse off by £35 a month, or £390 a year. But let's face it, they can probably afford that.

Far more significantly, the Treasury's own figures reveal that, come next April some 4.41m pensioners will be worse off in real terms with an average loss of £83 as a result of the freezing of the age-related income tax personal allowance. Within that figure, some 360,000 people aged 65 will lose an average £285 each while 230,000 people will be brought into income tax.

Anyone born on 6 April 1948 or later will not qualify for the age-related allowance at all. To put that into context, at present, everyone aged 65 or more can receive £9,940 a year without paying income tax, while everyone aged 75 or more can receive £10,090.

"It's an enormous stealth tax for older people," said Ros Altmann, director-general of Saga. "Over the next five years, pensioners with an income of between £10,000 and £24,000 will be paying an extra £3bn in tax while richer pensioners are left unaffected."

 

The squeezed middle

But what about the widely-flagged increase in the standard personal allowance to £9,105 next year? The Chancellor boasted yesterday that the allowance increase would put an extra £220 a year into the pockets of 24 million taxpayers.

As ever, he wasn't revealing the whole picture. An estimated 678,000 people will become higher-rate taxpayers next year for the first time when the starting point for the 40 per cent rate tax falls to £41,450 from its current level of £42,475.

 

The hard-up

But what about hard-up folk, surely that £220 a year will make a crucial difference to them? Not so, according to Citizens Advice. The charity says announced benefit cuts would take all but £33 of the tax gain for most of their clients.

Gillian Guy, chief executive at Citizens Advice said: "Raising the personal tax allowance is an empty gesture to struggling families on low wages. Poorer working families who get housing and council tax benefits will not get all of the money in their pocket – because as their income goes up, their benefits will go down."

Some of the pleasures enjoyed by low earners were targeted yesterday. Fags rose 37p a packet while Greggs pies and pasties will rise a fifth in price, once the 20 per cent VAT is added to them. Gaming machines in pubs will be also be hit by increased taxation.

At the same time struggling families face energy bills they can't afford and rising petrol costs. On top of January's VAT hike – which added almost 3p to a litre of fuel – George Osborne plans a duty increase of almost 3p a litre in five months' time.

Suggested Topics
News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Senior QA Engineer - Agile, SCRUM

£35000 - £50000 per annum + benefits: Ashdown Group: Senior QA Engineer (Agil...

Marketing Executive - West Midlands - £28,000

£26000 - £28000 per annum: Ashdown Group: Digital Marketing Executive (SEO, PP...

Retail Business Analyst

£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our retail client ...

Senior C++ Developer

£400 - £450 Per Annum possibly more for the right candidate: Clearwater People...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week