Winners and losers of the Budget
Filed under: The Budget
His headline grabbing measures are pretty far reaching, so just who will benefit and lose out as a result of these radical changes?
Families – win and lose
The Chancellor confirmed a commitment to lifting low earners out of tax by increasing the amount of income we can keep before having to pay tax. Mr Osborne announced an overall goal to raise the personal allowance to £10,000. This starts with a rise of £1,100 in the personal allowance next year - increasing the amount people can earn before having to pay tax to £9,205.
The much-debated cut to child benefit was confirmed, albeit through a less direct hit than was outlined in the pre-Budget report. The benefit will be removed gradually for those earning more than £50,000 – reducing by 1% for every £100 earned over the threshold. He had planned to axe it where one parent earned over £43,000.
The Chancellor said the change will mean 750,000 households will not now lose child benefit and only those earning over £60,000 would lose the payment altogether.
Pensioners – win and lose
The Chancellor announced his goal to simplify the tax system for pensioners through a single tier pension. The major modification will see pension payments set at around £140 per week based on full national insurance contributions, which will lift many out of means tested benefits like Pensions Credit.
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The move has been widely welcomed by the industy, with Adrian Boulding, Legal & General's pensions strategy director, believing it will lift people's confidence in the pension system.
"The timing of this is perfect. Coinciding with the launch of auto-enrolment this autumn the Chancellor will be sending a message to people that every penny they save in a pension will benefit them in retirement and not be lost against means tested benefits like Pensions Credit," said Boulding.
"For the first time in a generation people will understand how much pension they will get from the State, and realise how much more they need to save themselves in workplace pension schemes."
However, the Chancellor's attempt to simplify the tax system actually leaves pensioners worse off. He announced plans to end age-related tax allowances for pensioners - a move which has been slammed as a raid on their incomes.
When announcing the raise in the personal allowance to £9,205 to lift millions of working people out of tax, he said the threshold for pensioners would not be increased in line with inflation as as expected but frozen at 2012-2013 levels from 5 April 2013.
Despite claiming that pensioners would be no worse off in cash terms, the "granny tax" will erode pensioners incomes due to inflation and leave them worse off by more than £250 a year, according to the Shadow Secretary Ed Balls.
Smokers - lose
The Chancellor hit smokers, but spared drinkers, announcing that the price of a packet of cigarettes will rise by 37p from 6pm today. He said said there was "clear evidence" that tobacco price rises helped encourage existing smokers to quite and deterred youngsters from taking up the habit.
He also announced an increase to the tobacco duty escalator – the formula used to tax tobacco – which would see the price of a packet of cigarettes rise by 5% above inflation up from 2% each year. The government projects the move will raise an additional £260m in tobacco taxes over the next five years.
Currently priced at around £7.09, a typical packet of Marlboro will rise to £7.47 according to the Tobacco Manufacturers' Association. A 25g packet of rolling tobacco sells for £7.54 – that will rise to £7.91 according to the TMA.
The wealthy – win and lose
As anticipated, the Chancellor cut the 50p tax rate of income tax to 45p from April 2013. He said the rate, paid on earnings over £150,000, was the highest in the G20 and damaged Britain's competitiveness.
Yet Mr Obsborne made it clear that he intends to raise more from the wealthy, which he did through clamping down hard on excessive tax avoidance and increasing duty on high net-worth properties. He raised Stamp Duty from 5% to 7% on residential properties worth more than £2million.
Mr Osborne also announced a crackdown on the practice of purchasing properties through companies, which he said was a source of abuse among high earners. He announced an increase in Stamp Duty to 15% on residential properties worth more than £2m that are purchased through corporate enterprises.
Critics have slammed this move as a tax on London and the South East. "Increasing stamp duty on properties priced at more than £2m will have a negative impact on transactions at the top end of the market and will disproportionately impact the London property market," says Adam Challis, Head of Research at Hamptons International.
"London's economy relies on being an attractive place for corporate executives to base their businesses; the Robin Hood Addiction can't go on forever without impacting London's global competitiveness."
First-time buyers – lose
The Budget provided very little to spark recovery in the fragile property market and although not expected, it was disappointing to see no extension to the stamp duty for first-time buyers.
"This Budget week is proving to bring a double whammy for first time buyers: not only has the Chancellor failed to offer any real help to lower and middle income homeowners and First Time Buyers, but from Saturday, the Stamp Duty Holiday for FTBs will be coming to an end," said Wendy Evans-Scott, president of the National Association of Estate Agents (NAEA).
"With First Time Buyers struggling to purchase their first home, the Government should think imaginatively and consider a one-off stimulus, such as a First Time Home Buyer Tax Credit as used in the United States".
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- What the Budget means for families - from Parentdish