Critchley Hall News
Darling, could you please pass me some tax cuts?
In the face of the current ‘financial crisis’ the Chancellor of the Exchequer has announced several changes to support the economy during these difficult times in his Pre-Budget Report for 2008.
One of these changes will take almost immediate effect as from Monday 1st December VAT will be cut from 17.5% to 15% until 31st December 2009. However the VAT cut on tobacco, alcohol and petrol will be offset by increasing the duties on these products.
Other proposed measures include changes within Income Tax. From April 2011 a new top rate of income tax, at 45%, will be introduced for people earning £150,000 or more. This will affect the top 1% of earners. There is a very significant change to a long standing part of the tax system, which is that everyone can earn the first slice of their incomes tax-free, currently up to £6,035.
From April 2010, people with incomes between £100,000 and £140,000 will have a cut in the value of their tax allowance. For people with incomes above £140,000 the chancellor will remove the personal allowance altogether.
For basic rate taxpayers, this year's increase in the personal allowance will be made permanent, and will increase further next April, making basic rate tax payers £145 better off in the next tax year. This should benefit 22 million basic rate taxpayers.
However, National Insurance Contributions are set to rise by 0.5%. The starting point for national insurance will be brought into line with that of income tax, so no one earning under £20,000 will in fact pay any more national insurance contributions.
Savers are also being encouraged as a new state supported saving scheme - known as the Savings Gateway - will be launched, in which the government will contribute 50 pence for every pound saved. It will start in 2010 and is targeted at 8 million people on low incomes.
Increases to pensions and child benefits will start three months early in January.
There will be a one-off payment of £60 from January for single pensioners and £120 for couples. Pension credit will rise in April from £124 to £130 a week for individuals and from £189 to £198 for couples. The state pension will rise in line with the highest rate of inflation this year, producing a rise of £4.55 a week for a single person.
BBC News website, Monday 1st December