Fight back against spending cuts and tax rises

by Ed Bowsher on 08 June 2010  |  0 comments
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Spending cuts and tax rises look inevitable in this month's emergency budget. Here are some steps you could take to lessen the pain.

I’ve already made some predictions about what George Osborne will do in his emergency budget later this month. Now I thought I’d see if there any steps you can take to reduce the financial pain.

Public sector workers

The outlook for public sector workers isn’t good. A pay freeze has already been announced. Compulsory redundancies and even pay cuts are on the cards.

So if you work in the public sector, I’d try my very best to keep my job. Work hard. Take on extra work. Stay friendly with your boss. Don’t worry if your colleagues think you’re a sycophant, keeping your job has to be your number 1 priority.

If you’re unlucky and do lose your job, don’t take a few months off. Start job hunting immediately!  Economic growth is going to be sluggish over the next few years so you should take every opportunity to find a new position.

Also try your very best to boost your savings pot. If you do lose your job, life is much easier if you have a savings cushion to fall back on. If you think you can’t find the money to save, check out How to save when you’ve got no money.

Child benefit

There’s a good chance that child benefit will become a means-tested allowance.  Sadly some mothers who are relatively poor probably won’t get around to filling out the claims form and so won’t get the benefit. And some richer mothers may wrongly assume that they won’t be eligible.

So, assuming that child benefit does indeed become means-tested, I’d encourage the great majority of mums to fill out the claims form. You might get a pleasant surprise and discover you were eligible when you thought you wouldn’t be.

Capital Gains Tax (CGT)

My friend Cliff D’Arcy has written a great article on how you can avoid the Capital Gains Tax hike.  I’ve just got one point to add. It might make sense to buy a bigger home for yourself rather than invest in buy-to-let properties.

The downside to this strategy is that you won’t get the rent you’d receive from a second home. But, on the plus side, you won’t have to pay any tax on your capital gain when you come to sell. That’s because you could benefit from the Main Residence Exemption. In other words, you don’t have to pay any tax on your principal home.

VAT

VAT may well be increased to 19 or 20 per cent. You could decide to make some big purchases such as TVs or furniture before a rise is announced. But don’t get carried away doing this – you might end up buying things you don’t need just so that you could get a ‘saving’ of only 2.5% or even 1.5%.

What’s more, George Osborne probably won’t announce an immediate rise in VAT on June 22nd. He’s more likely to say that VAT will rise in 2011 or even 2012. So if that happens, you’ve got plenty of time to plan your purchases at the current rate of 17.5%.

Save! Save! Save!

The next few years are going to be tough. So whether you work in the private sector or public sector, try and save as much as you can!