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28 March 2024

British budget not so taxing for the layman

Gavin Smith

Published

This week's question for the Money Doctor is from 31-year-old Kevin Robertson, originally from London and now working for an oil services company in Dubai. He asks the Money Doctor his views on the recent UK Budget and its main points.

Hi Kevin, thanks for your enquiry. Due to the new government being in place, this budget has seen an extraordinary number of changes as they try and get the budget deficit under control by 2015, so I'll try and run through the main ones that might affect you.

Big news for those on low incomes is that the income tax personal allowance is set to increase by £1,000 (Dh3,673)?to £7,475. The government also sticks with its target to raise personal income tax allowance to £10,000 during the current parliament. The increase on personal allowance takes a further 880,000 people out of paying income tax, also meaning 23 million basic rate taxpayers will gain up to £170-a-year. Also, the child element of tax credit is set to be increased. UK value-added tax will increase from 17.5 per cent to 20 per cent from January 4, 2011.

Anyone with shares or property in the UK should consider taking advice from an Independent Financial Advisor when it comes to the Capital Gains Tax changes. CGT is paid when people sell, give away or dispose off shares or property and a new level of 28 per cent will now be paid by higher rate taxpayers. However, those on lower incomes will still pay the previous flat rate of 18 per cent.

It is also proposed that tax on air travel will be switched from a passenger tax to a plane levy to encourage fuller planes. The effect on air fares will not be clear until the government takes a final decision on how to reform this tax.

The government is to review housing benefit and introduce new limits of £280 for two bed properties and £400 a week for four bed houses. These changes are expected to save £1.8bn a year or seven per cent of total housing benefit spending. Tax credit payments for families earning over £40,000 per year are to be reduced.

The state pension age will now to rise to 66, possibly by as soon as 2016. Public service pensions, which are one of the biggest burdens on state finances, will be addressed as part of the full spending review in October. From April next year, the earnings link on the basic state pension will be re-introduced

The independent Office of Budget Responsibility says growth is expected to be 1.2 per cent this year and then 2.3 per cent next year, falling to 2.7 per cent in 2014. Consumer Price Inflation is expected to reach 2.7 per cent by the end of the year before returning to the two per cent target in the medium term. The OBR says unemployment will peak this year at 8.1 per cent, then fall each year to reach 6.1 per cent in 2015.

The Chancellor also said Britain will not be joining the Euro this parliament and the Treasury's Euro Preparations Unit has been abolished.

Independent Financial Advisor Gavin Smith analyses readers' portfolio for Emirates Business. He is Area Manager for consultants PIC, a member of the deVere Group of companies. The views are his own