High earners were the big losers in today's gloomy budget, although there was some good news for
savers buried amongst all the misery.
In 2005, Labour made the bold claim that income tax would not rise during this Parliament.
But with the economy battered and bruised, chancellor Alistair Darling has reneged on that promise and battered those earning more than £150,000 with a top rate of 50% from next year.
Worse was to come for this income group, with tax relief on their pensions to be reduced at the same time.
ISA limits rise substantially
The chancellor did have some good news for savers, however.
As has been well documented on this site, savings rates have plummeted on the back of six consecutive base rate reductions, a move that has been particularly hard on pensioners, many of whom rely solely on their nest egg for survival.
To help ease the burden, the annual limit for
tax-free ISAs will rise from £7,600 to more than £10,200 for over-50s this year and for everyone else next year.
As per the original rules, half this amount (£5,100) can be saved in
cash and the rest in an
investment ISA.
As a point of interest this announcement, combined with the 50% tax hike, makes ISAs more attractive than ever to top earners.
Housing and jobs also get aid
Moving on to property;
prospective buyers will be heartened by news that the stamp duty holiday for homes up to £175,000 will be extended from the summer to end of year.
Furthermore, Darling has earmarked an additional £80 million for the shared equity mortgage scheme.
In a bid to ease the growing impact unemployment is having on our economy, Darling will pump an extra £1.7 billion into the Job Centre network. Statutory redundancy will also rise from £350 a week to £380.
For parents, there is a £20 increase in child tax credits from next year, while
child trust funds for disabled children will rise by £100 a year.
And now, some more bad news
For those who drink and smoke, the Budget also contained the now obligatory sin tax hikes.
From midnight, alcohol duties will go up 2% (an average of 1p per pint), while tax on tobacco will rise by a similar amount from 6pm tonight (that adds 7p to a pack of 20 cigarettes).
Motorists received a mixed bag from the chancellor. First off, the bad news: Fuel duty is set to rise by 2p per litre from September, and will be hit with above inflation hikes each April for the next four years.
The good news is that the widely expected scrappage scheme has been introduced. If you're unfamiliar with it, the scheme “pays” motorists to trade in their beat up old banger (at least ten years) for a shiny new low carbon model.
