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EnergyMillionaire Osborne not a 50p rate payer
Filed under: Tax, The Budget
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If you were heir to a decorating fortune, rented out a Notting Hill flat and earned £134,565 a year you would probably find yourself in the crosshairs of the £150,000 tax band.Oddly, George Osborne claims he doesn't pay this 50p tax rate. "My salary is less than £150,000..." he told the BBC this morning. "I'm not personally affected". Let's take a closer look.
Need to know: Savings
Nipping under the wire?
George Osborne told the nation yesterday he found aggressive tax avoidance morally repugnant so he must be confident he has personally not crossed the £150k threshold. But he will be within a whisker or two from it. His £134,545 House of Commons salary pushes him close. But there are other considerations, such as the rental income from his flat.But as one well-placed tax expert told AOL Money, "you would have thought that he would own that jointly with his wife. So that's fine. I also think he's only rented it out since last July. There's nothing to suggest he's renting it out at the full whack". Though he could have, of course.
Need to know: Savings
Few pension worries
Notting Hill rents aren't bargain basement. Rent for even a basic one bedroom flat would comfortably exceed £2,000 a month. "However, bear in mind," says this tax source, "that he might make charitable donations as well, which would lower his liability."Osborne is likely not contributing to a private pension as he will be entitled to the very generous House of Commons arrangements. What of the family fabrics and wallpaper making business, Osborne & Little?
If this company was profit-making, Osborne and the other family beneficiaries might receive a dividend. But Osborne & Little struggled last year with a pre-tax loss of well over £700,000. No dividend income there, then.
Corporation cut
"He will benefit," this tax expert added, "by the cutting of corporation tax to 24% from 26% - when Osborne & Little become a profit-making company again."Cabinet ministers' salaries have also been cut, giving him slightly more leeway too. Of course, there are plenty of millionaires on paper that don't have huge incomes. Property prices, particularly in the South East and London, see to that. And though Osborne has a sizeable claim on the Osborne & Little business, it doesn't - as we've seen - guarantee regular dough.
Allegations that Osborne's family previously set up offshore trusts to avoid inheritance tax have swirled around before, notably from a Channel 4 Dispatches program in 2010, which also implicated Andrew Mitchell and Philip Hammond.
All in, then, Osborne is likely to have just slipped under the wire. Just. It's important to remember that even if Osborne was caught by the 50p tax threshold, he would only be paying the higher rate of income over this £150k marker - a point that seems to get consistently lost in coverage of this issue.
Budget winners and losers
- Winner: 50p taxpayers<p> As of April 2013, the 50p rate will be reduced to 45p following a study which Osborne claims revealed it would make little or no difference to the amount of tax raised but would significantly reduce the damage to the economy. </p>
- 2. Typical APRs<p>Financial service providers always refer to 'typical APR' in advertising to attract customers with favourable rates of interest.</p> <p>Yet the typical APR on loans and credit cards is only available for those applicants who have a squeaky clean credit record, everyone else could end up with a much higher rate. For example, under EU rules, credit card providers only have to provide the typical APR advertised to 51% of applicants.</p> <p>So always consider this when applying for accounts and products, and if approved – look out the actual APR that you will be charged.</p>
- Loser: Families<p> 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, cutting off completely at the £60,00 mark. The Chancellor had planned to axe it where one parent earned over £43,000.</p>
- 3. Huge care costs<p>The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.</p>
- Winner: South East England air travel<p> A potential winner - Osborne particularly name-checked the South East in his Budget which many assume is a veiled reference to a Heathrow expansion.</p>
- Loser: Prospective homeowners<p> A new stamp duty rate of 7% (up from 5%) will be introduced on properties worth over £2 million - widely considered a sop to the Lib Dems calling for a mansion tax. </p>
- Motorists - winners<p> As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.</p>
- Winner: Booze<p> Alcohol is on safe ground - for the moment. Duty will remain the same but do expect an announcement on alcohol pricing.</p>
- Winner: Manchester<p> Manchester was given particular prominence in the Chancellor's speech. From an extension to the northern rail hub, a £1.2bn infrastructure investment and it being named as one of the cities to receive funding for superfast broadband, the Chancellor was keen to make a point that the Coalition cares about the North.</p>
- Loser: Tobacco<p> Duty will rise on all tobacco products by 5% above inflation, which will add 37p to a packet of cigarettes.</p>
- Winner: Wallace and Gromit<p> The Chancellor naming Wallace and Gromit caused quite a commotion on the Tory backbench and was possibly the most lively moment in the Chancellor's speech. The Chancellor is intent on keeping UK TV and film productions in Britain and will ramp up support to stop the exodus of British production companies abroad.</p>
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