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Comments following the Budget

For Richard and Alison, the Budget contained few surprises, with the Chancellor mainly confirming last year's proposed changes. However, Alistair Darling did have families like them in mind, as he spent a fair amount of time underlining his commitment to the family.

Child benefit increases due in 2010, have been brought forward to next year, although a more modest rise of 70p per week in Child Benefit will be received in the 2008/09 tax year. They will also be £50 a year better off through an increase in the Child Element of the Child Tax Credit.

The abolition of the 10% starting rate of tax and the reduction in the basic rate by 2% to 20% will go ahead. In addition, their annual income tax allowances have been increased by inflation, and their basic rate tax bands have risen to £36,000. Unfortunately, the reduction in the basic tax rate will impact on their pension contribution tax relief, and their net pension costs will rise as a result.

As previously advised, ISA contributions will rise to £7,200 a year and up to £3,600 can be held in cash.

While their daughter, Katy, may not have paid much attention to Mr Darling, she will benefit from his focus on environmental issues and, in particular, his determination to cut CO2 emissions and promote greener cars.

Richard, Alison and Katy may not see much changes in their circumstances from this budget, although they should not be much worse off. However, the real concern is whether Mr Darling's downgrading of the UK's growth prospects is a sign of harder times ahead.

Case study

The Chancellor has already announced his intention to scrap the 10% starting rate of tax, as well as reducing the basic tax rate from 22% to 20%. For most couples, this will be broadly neutral, but when coupled with the proposed changes to national insurance, part time workers such as Alison may lose out. Richard, however, is likely to gain but this would be negligible if he earns in excess of £39,000.

As parents, Richard and Alison benefited from the previous Chancellor's family-friendly policies. Indeed, in his last budget, Gordon Brown said that child benefit would increase and that families would be at the top of his agenda. In fact, much of any benefit increase will not surface until April 2010 and It remains to be seen if Alistair Darling will deliver his predecessor's promises.

ISAs are to continue indefinitely, albeit with some changes to their structure from 2008/09. Richard uses his maximum annual ISA allowance each year and in the coming tax year can increase the contributions by £200 to £7,200. Alison will be able to increase her annual subscription to cash within an ISA to £3,600. She does not use the maximum available at the moment.

However, under the new structure of ISAs, any overweight position in cash held within ISAs can be invested into stocks and shares in order to achieve capital growth aims over the medium to long term. This is because the distinction between mini and maxi ISAs is being abolished.

With the proposed abolition of taper relief and indexation relief, in favour of a flat 18% CGT rate, investment outside tax wrappers is better for capital gain rather interest generating investments.

What the Chancellor's pre-budget report gave away with some proposals, it reclaimed with others. A good example of this is the reduction in basic rate taxation and an increase in National Insurance.

For the average mid income family, such as Richard and Alison's, we expect small benefits, but Alistair may have some surprises up his sleeve.

Case study conducted by Paul Willans, Chief Executive Officer Mazars Financial Planning, www.mazars.co.uk