How does the Emergency Budget affect your finances?
So how has the Budget affected you personally?
If you took a straw poll of what people thought of yesterday’s Emergency Budget the general consensus would probably be ‘it was not as bad as I had feared’.
According to the Treasury's own analysis, individuals will only be worse off, from the income tax and national insurance changes, once their income gets close to £50,000. In fact, the income tax personal allowance is to be increased by £1,000 in April to £7,475. This will mean about 23 million basic-rate taxpayers will pay up to £170 a year less, while 880,000 will pay no income tax at all. According to the BBC to stop higher rate taxpayers benefiting from this, the starting point for paying higher rate income tax will be lowered from its current £37,400, to claw-back the benefit of the extra personal allowance. That date has not yet been named.
But obviously if you factor in the VAT increase everyone will be worse of from January 2011 as the cost of luxury goods and services will go up.
The other sections of society who are likely to be most affected by the Emergency Budget are those who rely on social benefits as well as public sector workers, the later justifiably so in my opinion. (A recent report found that over their lifetimes people in the private sector worked 23 per cent more hours – the equivalent to a further 9.2 years extra work – because of their later retirement, shorter holidays and lower likelihood of going on strike. Public sector workers also enjoy better pay and better pensions)
On top of that anyone about to realise a capital gain (such as selling an investment/share portfolio or second home) will see their capital gains tax bill jump by over 50% (the old CGT rate has been increased from 18% to 28% for high rate tax payers). But as stated in my post this morning basic rate tax-payers will also get a nasty CGT shock following the Emergency Budget.
So the question everyone is asking is ‘How does the Emergency Budget affect me personally?’
To answer that first off read my post Emergency Budget at a glance, if you haven’t already done so.
Then secondly use this Emergency Budget calculator which has been developed by accounting firm KPMG. Simply plug in a few details and it will tell you how much better/worse off you will now be as a result of yesterday's Budget.
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