This wouldn’t be a finance blog if I didn’t mention this week’s Budget. If you tried to follow it on TV or on twitter, you’d be forgiven for getting a little confused about what the overall outcome was for you. Will you be better off or not? Well, in this short post, I’ll explain what the budget means for the consumer.
Savings: GOOD NEWS. The Government wants us to save, save, save for our future and is helping us do that by:
- increasing the limit we can input into an ISA (tax-free savings account) each year to £20,000, up from £15,240.
- introducing lifetime ISAs for people under 40, to save up to £4,000 a year. The Government will also top up the amount we input by 25% i.e. for every £4 you save, they will add £1.
Income tax: GOOD NEWS for low and high income rate payers here, as well as the self-employed as:
- the tax-free personal allowance (the amount of earnings that you do not pay tax on) is being raised from £10,600 to £11,500. This will mean some people will no longer pay any income tax.
- The 40% tax rate threshold is rising to include only those earning £45,000 and above.
- Self-employed workers will no longer need to pay Class 2 National Insurance. This amounts to an annual tax cut of over £130.
- E-bay-ers and AirBnB-ers (or micro-entrepreneurs) no longer need to file tax returns for this income if they earn less than £1,000 a year.
Insurance: BAD NEWS for all. Because we ALL need insurance.
- The insurance premium tax (a tax on general insurance premiums, such as home insurance, car insurance and travel insurance) will increase by 0.5% to 10%.
Fun: GOOD NEWS for drivers and beer/spirit drinkers, BAD NEWS for sugar lovers, wine drinkers and smokers. No increases in the tax paid on:
- Beer, cider, and spirits (not wine boo – the tax will rise in line with inflation)
- BUT tobacco duty will rise by 2 per cent above inflation
- ALSO a tax will be applied to sugary drinks companies which could mean the increase in costs will be passed onto consumers as a price rise. Stock up on your coca cola now!