What Does the Emergency Budget Mean for You?
23 Jun 2010 Tell a Friend
The first Budget under the Coalition Government was announced on Tuesday
by the new Chancellor of the Exchequer, George Osborne. The Budget sets
out a five-year plan to both pay down the country's deficit and also
encourage economic recovery. Below we explore some of the Budget's
main features, and look at how they will affect you.
Work
The income tax threshold is to be raised for under 65s to 7,475 GBP, a
1,000 GBP increase. This means that you can now earn up to this amount
before you are charged income tax on your earnings, a move that the
Chancellor estimates will lift 880,000 people out of income tax
altogether.
There will be a two-year pay freeze for those working in the public
sector. The exception will be for the 1.7 million public sector
employees earning less than 21,000 GBP, who will receive a flat 250 GBP
pay rise in both years.
The Government announced that the Default Retirement Age of 65 would be
reviewed, with the likelihood being that it would eventually be scrapped
altogether. This would give people the opportunity to make their own
decisions about continuing to work into older age.
In a bid to make the UK one of the world's most attractive places to do
business, the Government announced a four-year reduction in the rate of
Corporation Tax. Currently at 28%, the tax rate will fall by 1% each
year until 2015/2016 when it will remain at 24%.
Pensions
From April 2011, the government has announced a 'triple-lock' guarantee
for those receiving the basic State Pension. This will see the basic
State Pension rising each year in line with income, prices or by 2.5%,
whichever of these is highest. This measure is being put in place to
ensure that the basic State Pension allowance increases at the rate of
inflation.
Osborne announced plans to repeal rules put in place by the previous
government that would have seen higher-rate tax relief being gradually
withdrawn for employees earning 130,000 GBP or more. Instead, it is
envisaged that there will still be a reduction in the total amount that a
higher earner can enter into a pension fund each year, but via a scheme
that is far simpler to administrate.
The government will scrap compulsory annuitisation at 75 from April 2011
onwards, as a way of giving people more control over the way in which
they manage their retirement savings.
Property and Investments
Capital Gains Tax (CGT) will remain at 18% for anyone paying income tax at the lower rate. For everyone liable for the higher and additional rates of income tax, the rate of Capital Gains Tax has now risen to 28%. Capital Gains Tax applies to gains that you make when you sell or give away an asset that has increased in value.