We all expected a political budget aimed at trying to win the General Election for Labour and with a series of measures targeting the rich, Chancellor Alistair Darling could scarcely deny that the upcoming election did not loom large in his financial thinking prior to today’s announcement.
But sweeping aside the spin from Number 11, what do today’s announcements mean for you?
A phoney Budget?
The short answer is that very little that Mr Darling announced today is likely to have much of an impact. Despite slipping recently in the polls the Tories are still more likely to be in office than Labour in a few months time and they’ve said they’ll announce what is effectively their own Budget within 50 days of taking office.
In terms of the money in your pocket your only face being really hard done by if you’re one of the wealthiest 2% in the country. The Chancellor believes this group will pay for around 60% of the tax increases he announced – most notably in the new 50% income tax bracket for those earning over £150,000.
Good news for first-time buyers
The one piece of really good news was reserved for first-time property buyers. For those getting onto the property ladder for the first time the Treasury has opted to double the threshold at which stamp duty is suspended from £125,000 to £250,000 for the next two years. That means someone buying a house at £250,000 now will save £2,500 in tax, a sizable sum.
It’s less good news for more wealthy home buyers though – with stamp duty on properties worth more than £1 million being upped from 4% to 5%.
Putting up prices
It won’t have come as much surprise to see the Chancellor using the Budget to announce increases in taxes on petrol, alcohol and cigarettes, but with the first of those already approaching record prices it could signal some tough times for motorists. The Chancellor announced that petrol duty will increase by a penny in April before further increases in October and then in January 2011.
Savings
Since Alistair Darling’s last Budget speech it’s been a miserable 12 months for savers. The Bank of England base rate hit 0.5% in March 2009 and since that time the number of savings products sinking below the 0.5% mark has increased by around 40%.
It was the inflation figures earlier this week, perhaps more than the Budget, though, that might have been significant for savers. Inflation has come down to 3% but that figure still dwarfs the returns available from most accounts. The average return on an instant access account is a pitiful 0.7%.
The only consolation, and it will be pretty slim consolation, is the extension of the ISA limit from £7,200 to £10,200 confirmed today. It means that savers will be able to protect up to £5,100 of cash savings against tax each year. With average rates currently so poor savers need to do everything they can to maximise returns and making use of a high-paying ISA is a good start.
Click here to compare savings accounts.
|