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The Budget Statement 2014 – 10 key points

20/03/2014

On Wednesday Chancellor George Osborne announced his Budget Statement to the House of Commons, where he set out his plans to stimulate our recovering economy.

Early signs suggest most are happy with the proposals set out by the Chancellor as several tax breaks were made for the lower earners, potentially making the cost of living cheaper for the next year.

If you’re not sure exactly what the Budget is, or you wanted to find out more about the History and Traditions of the Budget Statement, then it might be worth reading some of the following blogs.

Budget Statement 2014 – What is it?
Budget Statement 2014 – History and Traditions

However, if you wanted a quick summary of the key points which could, and probably will affect you, then it may well be worth reading this blog.

1. Lower earners to benefit from Income tax



The Chancellor announced that income tax allowance will be increased.

Income tax allowance is basically the amount you can earn without paying income tax. So if you earn less than the income tax allowance threshold, then you won’t actually have to pay any income tax.

This is currently set at £9,440 and was already set to increase to £10,000 in April. However, as of next year, this will now increase to £10,500, meaning that anyone earning less than this will not have to pay any income tax at all.



2. Petrol duty frozen



Some good news for drivers is that the planned rise in the price of fuel will be scrapped; meaning that tax on petrol will remain the same.



3. Good news for the local pub



There was some good news for pub landlords as the annual price increase on alcohol of 2% above the rate inflation have been scrapped. Instead, it will increase in line with the rate of inflation.

There’s even more good news for those who drink spirits or ordinary cider, as duty has been frozen on these drinks, so prices will not increase, even with inflation.

Additionally, the duty on beer has actually been cut in a further boost to the pub landlord, as the duty on a pint of beer will fall by 1%.



4. Tobacco



As expected, duty on tobacco will continue to rise by 2% per year, up until the end of the next parliament. This means a packet of 20 cigarettes will soon increase by an average of 28p.



5. Tax laws on gambling to be changed



There were some big changes to tax rates on gambling, especially for the struggling Bingo hall. Bingo halls have been given a huge tax boost as tax will be cut from 20% to 10% on Bingo. Mr Osborne said the reason for this was to “protect jobs and protect communities.”

He also announced that controversial fixed rate betting machines, usually found in the local bookies will increase from 20% to 25%.



6. How you can save tax-free has been simplified



There has been a huge reform as to how much you can save tax-free, and where you can save.

You are currently able to save up to £11,520 in a tax-free Stocks and Shares ISA (Individual Savings Account) where all growth via interest and bonuses are sheltered from the tax-man.

The government have proposed that this should be changed, first by raising the savings allowance to £15,000, meaning you can shelter more of your savings from the tax-man.

And secondly, the ISA will be simplified by allowing you to invest up to the full ISA allowance of £15,000 by investing all of it into either a Cash ISA, a Stocks and Shares ISA, or by combining the two.

At the moment, you can already invest into both a Cash ISA and a Stocks and Shares ISA, but only half of the total allowance can be invested into a Cash ISA.

As of July 2014, you will be able to invest as much as you want into a mixture of a ‘Cash ISA’ and a ‘Stocks and Shares ISA’, as long as your combined annual savings don’t go over the £15,000 overall allowance. So for example you could invest £12,000 in a Cash ISA and £3,000 in a Stocks and Shares ISA, or vice versa. Or alternatively you might prefer to choose to invest your entire savings into a single Stocks and Shares ISA, or into a single Cash ISA.



7. Pensions made more flexible



One of the biggest talking points of the statement was the reform to the pensions system.

The Chancellor has proposed that there needs to be more flexibility into how people of the pension age can access their pension pots. Before hand, people of the pension age would generally need to buy an annuity with their pensions, which essentially guarantees you a regular income for the rest of your life. However, annuity rates have been poor in recent years.

As of March 27th you will now have the flexibility of withdrawing your entire pension in a cash lump sum, as long as you are of the pension age. This would still include the old option of withdrawing 25% tax free, however, the remaining will now be charged at the marginal income tax rate, as opposed to 55%.

There have also been various changes to the amount your pension needs to be worth for a ‘flexible drawdown’ limit and ‘triviality’ limits.

If you have any questions about your pension, then you can speak to one of our financial advisers on 0800 092 1254, or by asking a question online.



8. Benefits have been frozen



Welfare payments have been capped at £119.5bn for their first year in parliament, assuming they win the election.

This includes excludes the state pension and benefits such as job seekers allowance, but includes all other benefit payments such as housing benefits.



9. Roads



We should see an improvement in the quality of our roads in our local communities as a £200m budget has been set aside for local councils to use to fix pot holes.

In order to gain access to this fund, local councils will have to bid for the funding on an individual basis.



10. Energy



Manufacturers based in the UK will be see £7bn investment in helping them cut energy bills. Mr Osborne claimed that the aim of this was to keep more manufacturing jobs in Britain.

Additionally, carbon emission charges have also been capped, which will save the average family around £15 a year.



Need advice?



Do you have any questions about how the budget will affect you? The contact one of our advisers by calling 0800 092 1254, or by asking a question online.

























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