Are you a Budget winner or loser?
First-time buyers will not have to pay stamp duty on properties bought for less than £250,000 this financial year.
The move will save an estimated 73% of first-time buyers from having to pay this tax – normally charged at 1% on property between £125,001 and £250,000.
A first-time buyer is defined as someone who has never owned a property in the UK or abroad before – so if you are buying with a partner then both of you must have previously rented in order to qualify.
Alistair Darling confirmed the new 50% rate of income tax on people earning more than £150,000 a year – the top 1% of earners – will come into place in April.
For people with incomes over £100,000 a year - the top 2% - the government will gradually remove the value of their personal allowances.
The first-time buyer stamp duty exemption will be paid for by increasing the rate of stamp duty on properties worth £1 million or more to 5%. Previously, properties worth more than £500,000 were charged stamp duty at 4%.
The chancellor also announced that, as part of the government’s drive to prevent tax avoidance and evasion, the UK would sign tax information exchange agreements with Dominica, Grenada and Belize. Its tax agreements already signed with Liechtenstein is expected to bring in around £1 billion of extra revenue.
ISA savers and investors
The annual ISA allowance will rise each year in line with inflation, starting in April 2011. Based upon Darling’s estimated inflation rate of 2% for the next year, this means the ISA limit will be £10,400 from 2011/12.
The government has also proposed allowing investors to put alternative investment market (AIM) shares into their ISA portfolios.
The government will make it easier for those over 60 to receive working tax credit by reducing the number of hours they needed to work to be eligible.
The pensioners' higher winter fuel payment of £250, or £400 for the over-80s, will be guaranteed for another year.
Darling confirmed that the weekly state pension will increase to £132.60 from April. From April next year, the personal allowance for older pensioners will also increase, meaning no one over 75 will pay tax on the first £10,000 of income.
The inheritance tax threshold will remain frozen at £325,000 for a further four years to help pay for the care of older people.
All income tax bands and personal allowances (the amount you can earn before tax kicks in) will be frozen for the next financial year. This means that people who receive pay rises will pay more tax.
The national minimum wage will rise from 1 October 2010 to:
* £5.93 for workers aged 21 and over (by 2.2% from £5.80)
* £4.92 for workers aged between 18 and 20 (up 1.9% from £4.83)
* £3.57 for workers aged 16 to 17 (up 2% from £3.64)
Darling also confirmed in the Budget that the new 50% rate of income tax on people earning more than £150,000 a year – the top 1% of earners – will come into place in April.
The government will provide £270 million to help universities create more places for students in 2010/11.
It has also extended its guarantee to young people out of work until March 2012. This guarantee means "no one under 24 will be unemployed for longer than six months without offer of work or training," he says.
Child tax credit will increase by £4 a week to parents of one and two-year-olds.
Capital gains tax (CGT) has been maintained at 18%, but relief for entrepreneurs has been extended.
The concessionary rate of 10% for entrepreneurs – introduced in 2009 – will double from £1 million to £2 million of lifetime gains.
This means owners of small business, as well as employees and company directors who own at least 5% of shares in the company, are allowed to pay just 10% on any profits under £2 million.
Darling announced a package worth £2.5 billion to help business. A new investment body called UK Finance for Growth will help firms access money.
A new Growth Capital Fund will also provide £500 million of finance to fast-growing companies.
Royal Bank of Scotland and Lloyds Banking Group have agreed to lend £94 billion of new loans to small businesses in the coming year.
Business rates will be cut for one year from October and annual investment allowances for small businesses have been doubled to £100,000.
The computer games sector will also be given additional government help.
Drinkers and smokers
Duty on cider has increased by 10% above inflation. The move will add 5p to a litre of still cider and 9p to a 75cl bottle of sparkling cider from Sunday 28 March.
For the rest of the sector, the chancellor went ahead with the tax escalator, which automatically increases tax on alcohol by 2% above inflation.
With inflation running at 3%, the 2% escalator – introduced in the 2008 Budget to appease the health lobby – will now see tax on drinks rise by 5%. The rise will add 10p to a 75cl bottle of wine; 12p to a 75cl bottle of sparkling wine 36p to a 70cl bottle of spirits; and 2p on a pint of beer.
Duty on tobacco has also increased by 1% above inflation – it will now increase by 2% in real terms each year until 2014.
The planned increase in fuel duty will be phased in over the next 12 months. The first 1p increase will be added in April, followed by another 1p addition in October of this year and the final increase in January 2011.
Darling also announced £100 million to improve local roads and £185 million for motorways.
The financially excluded
Everyone will have access to a basic bank account, as part of the government’s bid to tackle financial exclusion.
An estimated 1.75 million people don’t have a basic bank account - meaning they lack the ability to deposit wages, benefits or other payments.
Most banks refuse accounts to those with fraud convictions, or those who are undischarged bankrupts.
Public sector workers
Although Darling ruled out immediate cuts to public spending, he did announce some measures to “control” spending that could impact public sector workers.
He confirmed plans to save £4.4 billion in public sector pay and pensions by 2012/13 and announced reductions in the pay bill for senior civil servants.
Overall, the government intends that public pay settlements will be held at a maximum of 1% for the two years from 2011.
It will also implement reforms to ensure public pensions are affordable and will “identify savings across every part of the public sector by delivering services more efficiently”.
One saving will be made by relocating civil servants from London offices to elsewhere in the country – 15,000 posts will be relocated within the next five years with the eventual aim to reduce the number of civil servants in London by a third.
And 1,000 posts from the Ministry of Justice will be moved out of central London, saving £41 million.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Exclusion is a potential loss or specific risk that an insurance policy does not cover and they occur in all types of insurance policies. Common exclusions include: natural hazards (exploding volcanoes, earthquakes) war, nuclear fallout, wear and tear (anticipated through the use of a product, especially motor insurance), UFO damage to vehicles, vehicles “stolen” by vengeful spouses, travelling any pre-existing health problems and travelling to countries the Foreign & Commonwealth Office deems too dangerous.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.
Child tax credit
A scheme started in 2003 that sought to replace a raft of other tax credits and benefits, the payout depends on the number of dependant children in a family, and its level of income. The amount of credit is reduced as income increases. It is payable to the main carer of a child, usually the mother, and is available whether or not the recipient is working.
Alternative Investment Market
AIM is the London Stock Exchange’s international market for smaller companies. Since its launch in 1995, 2,200 companies have raised almost £24 billion listing on AIM. The market has a more flexible regulatory system than the main market and can offer tax advantages to investors but its constituents are a riskier investment than bigger companies listed on the main market.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).