Budget 2008

Budget may have underestimated risk to economy

Rebecca Atkinson — Mon, 07 Apr 2008 12:16:26 +0100

Alistair Darling may have underestimated the risks facing the UK’s economy in his 2008 Budget, a report by the Treasury Select Committee has warned.

Despite the chancellor lowering government forecasts for economic growth over 2008 and 2009 in his March Budget, the Committee’s report claims that the Treasury faces a challenge in meetings its targets.

In the 2008 Budget, Darling downgraded the forecast of GDP growth to 2.25% in 2008, 2.35% in 2009 and 2.5% in 2010.

Money worries haunt consumers

Rebecca Atkinson — Wed, 19 Mar 2008 12:25:25 +0000

The rising cost of living and global financial turmoil have hit consumer confidence hard with 30% fearing they won’t be able to cope financially for much longer.

A poll of 3,500 people by moneysupermarket.com found that just 16% have no financial worries. However, 30% didn’t think they can cope financially much longer. A further 54% said they are worried about their finances but are managing to cope despite the rising cost of living.

Moneysupermarket.com says people have been "spooked" by the Budget, which many left financially worse off. Increases in “sin” levies, including road tax, cigarettes and alcohol, as well as expected council tax hikes this year are hitting many consumers’ pockets.

Cut your tax bill with charitable giving

Rebecca Atkinson — Fri, 14 Mar 2008 15:33:41 +0000

Alistair Darling’s Budget has given a boost to charities following fears the introduction of a lower income tax rate this April would cost them £90 million a year.

The rate of income tax will reduce from 22% to 20% on 5 April. While this is good news for workers, the subsequent cloud for charities is that the amount they could reclaim in gift aid would dip from £1.28 to £1.25 for every £1 donated.

However, Darling responded to concerns in his 2008 Budget by pledging to introduce an exemption for charities that will allow them to continue to claim gift aid at 22% for the next three years.

Darling scraps VAT on venture capital trusts

Rebecca Atkinson — Thu, 13 Mar 2008 12:18:08 +0000

Management fees on venture capital trusts and investment trusts will be exempt from VAT, Alistair Darling’s Budget has confirmed.

The changes for VCT will come into force from 1 October. The move follows the European Court of Justice’s ruling last year that the VAT charged on investment trust management fees was unlawful.

Daniel Godfrey, director general of the Association of Investment Companies, said: “We are delighted that the government has today the VAT exemption on management fees to VCTs. This is a very welcome boost to the industry and VCT investors who will benefit from this cost saving over the long-term.”

Council tax rates to increase by over 5%

Rebecca Atkinson — Thu, 13 Mar 2008 10:41:57 +0000

Council tax bills are likely to increase by 5.1% in 2008/09 despite the government urging councils to keep increases substantially below this level.

Government projections for council tax receipts in the Budget report reveal that in 2007/08 a whopping £23.7 billion was raised by local authorities. And in 2008/09 this is expected to increase to £24.9 billion – an increase of 5.1%.

Although the government is not responsible for setting council tax rates, local government minister John Healey said last December that the government expects average council tax increases in England to be “substantially below 5% a year”.

At the time, Healey forecast council tax increases of 4% for 2008/09, 4.4% for 2009/10, and 4.3% for 2010/11.

Government does u-turn on trust tax

Rebecca Atkinson — Wed, 12 Mar 2008 18:14:32 +0000

The Budget wouldn’t be the Budget without at least one u-turn by the government, and this year’s was no exception.

Alistair Darling’s first Budget reveals that the expiry date for interest in possession trusts has been extended from 5 April to 5 October 2008.

Back in March 2006 the government unveiled significant changes to the way some trusts, including interest in possession, are taxed. Trustees of interest in possession trusts, which provide an income for life to a beneficiary, were given until 5 April to name the ultimate beneficiary or face periodical charges as well as exit charges for inheritance tax.

However, the Budget has granted trustees an additional two months to name the beneficiary or face the burden of inheritance tax.

Tax-free pension loophole closed

Rebecca Atkinson — Wed, 12 Mar 2008 17:36:51 +0000

The Budget has confirmed that the Revenue has closed a loophole which allowed pension funds to be passed on tax-free at death

Providers of small self-administered pension schemes (SSAS) had been marketing scheme pensions as a way of passing pension money onto family without tax since A-day. However, the government has clamped down on what it regards as an abuse of the rules. The change will apply to members who die on or after 6 April 2008.

New tax-break on small pensions

Rebecca Atkinson — Wed, 12 Mar 2008 16:27:20 +0000

Retirees with very small amounts of money in occupational pension schemes will be able to take out up to £2,000 tax-free under new rules announced in today’s Budget.

Individuals over the age of 60 can get this lump sum even when receiving an income from another larger pension fund. The new rules will look at each occupational scheme in isolation.

Since April 2006, the triviality rules have allowed individuals to take the total value of their pension pot if it comes in at less than 1% of the lifetime allowance - £16,000 in the current tax year rising to £16,500 in April.

Darling fails to take action over slowing housing market

Rebecca Atkinson — Wed, 12 Mar 2008 16:18:57 +0000

Alistair Darling’s Budget has failed to offer any immediate support to struggling home owners or first-time buyers despite the faltering property market and threat of negative equity.

Calls for higher stamp duty thresholds were not taken on board by Darling. Instead, he unveiled a new scheme that will allow key workers and first-time buyers to buy half of their home, with housing associations owning the remaining 50%. He also championed long-term fixed rate mortgages of up to 25 years and reiterated the government’s commitment to building more houses.

UK growth forecast cut

Chris Thomas — Wed, 12 Mar 2008 15:51:32 +0000

The UK economy is set to grow at a slower rate than previously expected this year, Alistair Darling said in his Budget speech.