Ask an expert: Budget Q&A

- Have your say on the Budget
- Find details of local IFAs

We put your Budget questions to a panel of experts, here are their answers

Question: Janey Skelton
I am still working but receive a state pension. Is this going up and by how much?

Answer: Tom Mcphail, Hargreaves Lansdown
The state pension is going up to £90.70

Question: Rachel Stewart
Has the chancellor really done nothing to address the issue where the poorest in society will be hit by the abolishment of the 10p tax rate. I am a pensioner (female) aged 62 and will be paying more in tax in the coming year.

Answer: Tom Mcphail, Hargreaves Lansdown
The Chancellor has done little that will be of immediate help to you. The winter fuel payment to the over 60s increases from £200 to £250. From age 65 you will be entitled to a substantially increased personal allowance - £9,030 for the current tax year, but I’m afraid you are going to have to wait for that one.

Question: J.G. Wilson
What did he mean about £7200 pounds on the isa?

Answer: Tom Mcphail, Hargreaves Lansdown
The maximum annual contribution you can make to your ISA is increasing from £7,000 to £7,200

Question: TF Conlon
What about non-doms?

Answer: Donna Bradshaw, Hargreaves Lansdown
The Chancellor announced that some changes had been made to the draft legislation on the taxation of non-domiciled UK residents. The changes mean that any non-dom; who is 18 or over and has been UK resident for more than seven of the last ten years, with unremitted foreign income and gains over £2,000 a year; will pay an annual tax charge of £30,000.

Question: W Gregory
What is the Nil Rate Band for IHT from 6th April, 2008

Answer: Donna Bradshaw, Hargreaves Lansdown
The Inheritance Tax Nil Rate Band for the 2008/2009 tax year has increased to £312,000. This means the first £312,000 of an individuals estate is free of tax, with the excess above this amount attracting tax at 40%.

Question: Anon
We are a married couple husband earning £1000 a month and i work part time earning £178 a month we currently get working tax and child tax will we still recieve any working tax and child tax

Answer: Dennis Hall, Yellowtail Financial Planning
The qualifying criteria for working and child tax credit are overly complicated, but at first glance it looks likely that you will receive the tax credits. How much you receive will depend on several factors including whether the income figures you have provided relate to your gross earnings, i.e. before tax and national insurance, or whether this is your take home pay. Also the number of children you have affects the amount you receive. From October 2008 the minimum income guarantee for a married couple with one dependant child where at least one parent works full time, rises to £292 per week

Question: Jill
I own a holiday home that is let for about 30 weeks each year. If I were to sell, would the profit be subject to CGT, and at what rate? I bought it for £170,000 five years

Answer: Dennis Hall, Yellowtail Financial Planning
The good news is that Furnished Holiday Lettings do qualify for the new Entrepreneurs’ Relief with regard to Capital Gains, bringing the effective rate of Capital Gains Tax down from 18% to 10% on the first £1 million of qualifying gains from April 2008. We can ignore indexation and taper relief and apply the new rates to the actual gain made. If we assume a gain of £100,000 is made then by applying Entrepreneurs’ Relief this is reduced by 4/9th to £55,556 and this is then taxed at 18% and voila £10,000 tax - it’s a complicated roundabout way of getting to 10% but that’s the Revenue’s calculation!

Question: Peter Davies
How will people on long term incapacity benefit be affected by the new rules of helping people back into work in 2010?

Answer: Dennis Hall, Yellowtail Financial Planning
From October 2008 new claimants will be subjected to a Work Capability Assessment where the focus will be on what can the individual do in the workplace rather than what they cannot do. At the same time the Incapacity benefits they receive will be replaced with a simplified Employment and Support Allowance, along with the “Pathways to Work” initiative. Existing claimants i.e. those prior to October 2008, will not be required to undertake the Work Capability Assessment until April 2010 onwards.

Question: Miss D Christie
I have a 17 year old son who is disabled and i am also disabled could you tell me if the budget is going to help or worsen my situation?

Answer: Jason Butler, Chartered Financial Planner
Depending on whether you and your son work or not and the range of State financial assistance you qualify for, you should be better off as Disability Living Allowance, Incapacity Benefit, Carer’s Allowance and Tax Credits have all been increased. A full list of the amounts can be found at http://www.direct.gov.uk/en/Nl1/Newsroom/Budget2008/DG_073116

The Chancellor also announced a review of the way that housing benefit is claimed by vulnerable groups which might benefit you. If you would like face to face assistance or clarification then contact your local Citizens Advice Bureau

Question: Tony
As a non dom living in uk how will this budget affect me? I originally came over intending to just live here a short while, although I do have a british passport having an english mother. I got a good job, worked for 9 years, then got a long term illness which has prevented me from doing anything. I have my savings etc from my country of birth in an account offshore (about £80,000). I am worried stiff as that represents my pension. Does this budget affect me and what should I do?

Answer: Jason Butler, Chartered Financial Planner
Yes the budget does affect you. If you wish to remain resident in the UK from 6th April 2008 and you do not elect to be taxed on what is known as the ‘remittance basis’ then you will be subject to tax on income and capital gains tax on your worldwide assets, even if you do not choose to bring the income or gains into the UK.

This brings non domiciled people into the same treatment as UK residents who are UK domiciled. However, you are allowed to receive a certain amount of income and capital gains tax free before you pay tax and for 2008/09 these are £5435 and £9,600 respectively. So while you now have to declare income and gains arising from your capital, it is unlikely, if you are not working, that you will pay much, if any, tax anyway.

You can opt for the ‘remittance basis’ subject to paying £30,000 per annum, although this will not be payable if offshore income and gains are less than £2,000 per year. In your case, if you have no other assets than the £80,000 offshore it seems simplest to be taxed under the ‘arising basis’ and benefit from UK income and capital gains tax allowances. If you are in any doubt contact a local accountant or tax adviser for more guidance.

Question: Mr H Nowell
All of the discussion on the changes to CGT has dwelt on the sale of small businesses. Have there been changes in the calculations for individuals selling shares i.e. removal of indexation and taper relief?

Answer: Jason Butler, Chartered Financial Planner
Yes. The new CGT rules will greatly simplify the tax position for investors like you. From 6th April 2008 indexation and taper relief for individuals will disappear (indexation will remain for companies).

Instead of complex calculations any net capital gains arising (after taking into account any losses arising in the current year or that have been used from previous years) from selling your investments above the annual tax free allowance of £9,600 will be taxed at a flat rate of 18% regardless of how long you’ve held them. This should result in lower tax for private investors like you compared to the minimum 24% rate that currently applies for non business assets.

Do note, however, that if you have held your investments since before April 1998, you will lose any indexation relief that might apply up to that date. If the gain is above your annual exemption and you are married then you might think about transferring the holding to your spouse as a gift before 6th April 2008, as this will automatically uplift the acquisition value to include indexation to 1998 and thus reduce the capital gains when she eventually sells the asset.