Budget 2011 provides some relief for families
By UK CreditCards.com
Chancellor George Osborne's Budget speech on Wednesday contained a number of measures which are likely to be welcomed by UK households. For example, the chancellor said he wanted to "increase the living standards of every hard-pressed family in the country." However, the impact of the chancellor's measures against a backdrop of high inflation and unemployment remains to be seen. Here, CreditCards.com takes a look at some of the key changes that will affect Britons' finances.
tax allowance will increase, says chancellor
In his Budget speech, Mr Osborne confirmed that the personal income tax allowance will increase by £1,000, as planned. According to his calculations, this means that 23 million taxpayers will benefit from a real-terms increase of around £160 (£200 in cash terms). On top of this, he announced that from April 2012, the amount that an individual earns before they start paying income tax will rise by a further £630, to £8,105.
"That's another real increase of £48 extra per year or £126 in cash terms," the chancellor revealed. "Together with this year's rise, [it will mean] a total of £326 extra money each year for those working hard to pay for their family's needs." He also confirmed that the government aims for people earning £10,000 or less per year to be exempt from paying income tax by 2014.
Gillian Guy, chief executive of Citizens Advice Bureau, says that lower-paid workers and their families should find "some comfort" in the chancellor's announcement. "Raising the personal tax allowance will take at least 500,000 people out of the tax net and put some much-needed money in their pockets," says Guy. "The government are to be commended for sticking to a road map which will eventually take all those earning less than £10,000 out of the tax system altogether."
However, Ms Guy argues that the overall effect of the Budget will be neutral for many working families, as any gains from the change to the personal tax allowance "are likely to be outweighed by the 1% rise in National Insurance, cuts to child tax credit and the retention of the higher VAT rate."
Britons will see an impact on their household bills
In addition to the income tax changes, families may also appreciate the chancellor's efforts to cut the cost of petrol. Fuel duty was due to rise next week, but Mr Osborne cancelled the increase and announced an additional 1p per litre decrease in the cost of fuel. Edmund King, president of the AA, describes the announcement as a "common sense move," but says the government should do more to help vulnerable motorists, such as volunteer and rural drivers.
Another move that should benefit families is the chancellor's decision to delay the planned increase in air passenger duty (APD). Mark Tanzer, chief executive of ABTA - The Travel Association, notes, "The freeze in APD this year will be good news to holidaymakers, with travellers paying £145m less than they would have without this cut. It is only a brief pause from the continuing hiking of APD though, as travellers will be hit in 2012 by a double tax increase totalling £300m on top of the £2.2bn already going to the Treasury."
Joanna Elson, chief executive of the Money Advice Trust, also says that "several" of the chancellor's measures should have a positive impact on vulnerable families. But she warns that many households will not notice an improvement in their finances for some time. "Household budgets are being hit from every direction with increased unemployment, wage growth stagnation and benefit cuts squeezing income, whilst inflation and a potential rise in interest rates hit expenditure," explains Elson.
Ms Elson also notes that about one in every 33 UK adults contacted advice agencies for guidance on debts, such as credit card, mortgage and loan repayments, last year. "Until the broader prospects for the economy improve, especially around unemployment, many families will need to be keeping a close eye on their own budget," advises Elson.
Published: 24 March 2011
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