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Q&A: How will the Autumn Statement affect you? | Q&A: How will the Autumn Statement affect you? |
(about 17 hours later) | |
The Chancellor, George Osborne, has delivered the coalition government's latest plans for taxing and spending, in his annual Autumn Statement. | The Chancellor, George Osborne, has delivered the coalition government's latest plans for taxing and spending, in his annual Autumn Statement. |
In reality, it is a mini-Budget. | In reality, it is a mini-Budget. |
So, what does it mean for the pound in your pocket? | So, what does it mean for the pound in your pocket? |
What's happened to taxes? | What's happened to taxes? |
Many lower paid workers will find themselves paying less income tax. | Many lower paid workers will find themselves paying less income tax. |
The personal allowance, the amount that most people can earn before they pay income tax, will rise to £9,440 in April 2013. | The personal allowance, the amount that most people can earn before they pay income tax, will rise to £9,440 in April 2013. |
That is £235 more than the chancellor had previously said, and will represent a total rise in the allowance since April 2012 of £1,335. | |
What does this mean for people paying the basic rate tax of 20%? | |
In the current tax year (2012-13) they enjoy the current personal tax allowance of £8,105 and are then taxed at 20% on the next £34,371 of their income, thus their obligation to pay the higher rate tax of 40% starts at £42,476 of their income. | |
In the budget earlier this year it was decided that as they would benefit from a raised £9,205 personal allowance from April 2013, taxpayers would have the basic rate of 20% applied to a narrower, £32,245 slice of their income. | |
Thus the higher tax rate of 40% would kick in at a lower point of £41,450, dragging more people into the higher-rate tax bracket. | |
The Autumn Statement has changed things, again. | |
With the personal allowance now rising next April to £9,440, the slice of income to be taxed at 20% has been cut back, to £32,010. | |
This keeps the trigger point for 40% tax rate at £41,450. | |
The chancellor said this threshold for the 40% rate will now rise by 1% in 2014 to £41,865, and then to £42,285 in April 2015. | |
However, as average earnings are likely to rise by more than this, more people are going to see the top slice of their earnings drift into the higher rate tax bracket - a process known as fiscal drag. | |
Investors will also see some benefit from the latest changes, with the annual exempt amount for capital gains tax rising by 1% to £11,100. | |
The inheritance tax nil-rate band will rise too, from £325,000 to £329,000 in 2015-16. | |
How will my benefits change in April? | How will my benefits change in April? |
Millions of people claim state benefits of one sort or another, and many working age benefits will rise by 1% in April. | Millions of people claim state benefits of one sort or another, and many working age benefits will rise by 1% in April. |
That is probably going to be a cut in real terms though, as it is below the current level of inflation, which is 2.7% under the Consumer Prices Index (CPI) measure. | That is probably going to be a cut in real terms though, as it is below the current level of inflation, which is 2.7% under the Consumer Prices Index (CPI) measure. |
It is also below the September CPI level of 2.2% which is often used as the benchmark for the uprating of benefits. | It is also below the September CPI level of 2.2% which is often used as the benchmark for the uprating of benefits. |
Benefits such as Jobseeker's Allowance, employment and support allowance, and income support, as well as maternity, paternity and adoption pay, will rise by 1% for the next three years. | Benefits such as Jobseeker's Allowance, employment and support allowance, and income support, as well as maternity, paternity and adoption pay, will rise by 1% for the next three years. |
That will mean the weekly £71 jobseekers' allowance is likely to rise by 71p a week, rather than £1.56 next year. | That will mean the weekly £71 jobseekers' allowance is likely to rise by 71p a week, rather than £1.56 next year. |
Meanwhile child benefit will rise by 1% for the two years from April 2014 - it is frozen until then. | Meanwhile child benefit will rise by 1% for the two years from April 2014 - it is frozen until then. |
Anything for savers? | Anything for savers? |
Yes. The overall annual Isa contribution limit will rise modestly from the current level of £11,280 to £11,520 from April 2013, a rise of 2.1%. | Yes. The overall annual Isa contribution limit will rise modestly from the current level of £11,280 to £11,520 from April 2013, a rise of 2.1%. |
The chancellor had previously said this would be increased in line with inflation. | The chancellor had previously said this would be increased in line with inflation. |
What about pensions? | What about pensions? |
The basic state pension will rise by 2.5% next year to £110.15 a week. | The basic state pension will rise by 2.5% next year to £110.15 a week. |
Meanwhile, the two main limits on tax relief for pension saving are being reduced, again, although this will mainly affect the top 1% of pension savers. | Meanwhile, the two main limits on tax relief for pension saving are being reduced, again, although this will mainly affect the top 1% of pension savers. |
From 2014-15, the lifetime allowance for tax-free pension saving will be cut from £1.5m to £1.25m, and the annual allowance will be cut from £50,000 a year to 40,000. | From 2014-15, the lifetime allowance for tax-free pension saving will be cut from £1.5m to £1.25m, and the annual allowance will be cut from £50,000 a year to 40,000. |
Savings made above these limits will, as now, be taxed. | Savings made above these limits will, as now, be taxed. |
The chancellor said by 2016-17 this would recover about £1bn of the tax relief currently given away to people saving in pension schemes. | The chancellor said by 2016-17 this would recover about £1bn of the tax relief currently given away to people saving in pension schemes. |
And drivers? | And drivers? |
The chancellor drew cheers from his colleagues when he simply decided to do away with a scheduled rise in tax on petrol. | The chancellor drew cheers from his colleagues when he simply decided to do away with a scheduled rise in tax on petrol. |
The planned 3p per litre rise in fuel duty, which was due to be introduced next month, has been cancelled. | The planned 3p per litre rise in fuel duty, which was due to be introduced next month, has been cancelled. |