Chancellor George Osborne unveiled future plans for the nation’s finances last week with the annual Autumn Statement. Osborne revealed a number of economic reforms and policies the coalition will bring into force next year, many of which will affect millions of families.
Motorists will be given a break as the planned 3p rise in fuel duty has been scrapped for January. The government bowed under pressures from a number of consumer groups and MPs to cancel plans to increase motoring costs.
An extra £1 billion will be spend on roads including upgrading the A1,A30 and M25 as well as a £1 billion loan to extend London’s Northern Line to Battersea.
The housing situation in the UK has reached crisis levels and the government has been repeatedly called upon to provide affordable housing. In the Autumn Statement, the chancellor announced there would be funding to assist building up to 120,000 homes to address the issue.
Liz Peace, chief executive of the British Property Federation, said: “This is a welcome first step towards mitigating the damage being wrought by empty property rates and we commend the Chancellor for taking heed of the powerful body of evidence that we and other industry groups submitted to MPs and to Treasury over the Summer.
“The Govenment is rightly desperate to get Britain building again. Introducing a grace period for empty property rates for new development will remove a millstone from around neck of the property industry, and let it get on with what it does best – investing in our towns and cities, regenerating communities and building the offices, factories and shops in which we work.”
Osborne said there will be no new property tax in his Autumn Statement, however, earlier this year the government announced a new 15% stamp duty tax on all properties over £2 million.
Taxes and allowances
Osborne announced plans to increase the basic income tax threshold by £235 more than previously announced, to £9,440 a year, which is great news for those on low incomes who will see more of their cash. However, with the rise in living costs, it might not make a substantial difference.
Those paying the current basic 20% income tax rate enjoy a personal allowance of £8,105 and are then taxed on the next £34,371 of their income. In the budget earlier this year, the chancellor said the personal tax threshold would increase to £9,205 from April 2013.
The threshold for those paying 40% tax will increase by 1% in 2015 and 2015 from $41,450 to £41,865 and then £42,285.
This gives middle earners little legroom to enjoy the benefits of the increased tax threshold. The government reduced the earnings threshold for the higher tax rate of 40%, starting from a lower point of £41,450 from next April. This move will push millions of middle earners, who are already feeling the pinch, into a higher tax band.
As earnings are likely to increase over 2014 and 2015, many more could be pushed into a higher tax threshold.
Millions of people claim benefits from the state either through housing, work, pensions or for children, and any working age benefits will increase by 1% in April. Benefits such as Jobseekers Allowance, employment and support allowance, income support as well as maternity, paternity and adoption pay will increase by 1% for the next three years. Despite this, they will probably fall in real terms as this is below the current rate of inflation which stands at 2.7%.
Child benefit will increase by 1% for two years from April 2014, but is frozen until then. The Department for Work and Pensions claims that three million families will be better off with final elements of Universal Credit, which will see them better off by around £168 a month. This will impact those from the bottom two fifths of the income scale.
The ISA contribution limit, which increases with inflation, will go up to £11,520 from next April where the current cap stands at £11,280. You can compare ISA accounts with Propertywide.
The basic state pension will also rise by 2.5% for the next year to £110.15 a week. However, at the same time, the main limit on tax relief for pension savings is being reduced further. The annual allowance for pensions will be cut from £50,000 to £40,000 and is likely to affect the top 1% of pension savers.
Teresa Fritz, consumer finance expert at MoneyVista warns that others could be affected by the change:
“Middle-earners who have been a member of their work-place final salary scheme for a long time and who get a pay rise need to be careful. It’s quite possible that a pay rise could mean they breach the annual allowance for the year and become liable for a tax charge.”