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Autumn Statement 2012: what it means for you

Simon Ward
by Lovemoney Staff Simon Ward on 05 December 2012  |  Comments 9 comments

The Autumn Statement is done for another year. But what have George Osborne's decisions done to your bank balance?

Autumn Statement 2012: what it means for you

Chancellor George Osborne has delivered his 2012 Autumn Statement on the economy and public finances to Parliament. But what did he announce and how does it affect your money?

Income Tax

The Chancellor increased the threshold for the 40% higher rate of Income Tax from £41,450 to £41,865 in 2014 and then £42,285 in 2015. However, he admitted that this was a real-terms reduction due to the effects of inflation.

This was balanced by an extra £235 increase in the tax-free Income Tax threshold to £9,440 from April. The Government has continually pledged to raise the threshold to £10,000 by 2015.

Fuel duty

It was widely predicted that the Chancellor would postpone the 3p increase due to come in next month and that’s exactly what happened. The increase would have added £2.53 to the cost of filling up an average family car. That increase has been completely scrapped.

An increase planned for next April has been moved to September.

Pensions

The Basic State Pension will go up by £2.30 a week from April.

One of the most talked-about issues in the run-up to the Autumn Statement was the possibility of a cut in the pension tax relief limit for higher earners. And that’s indeed what happened as the annual limit was cut from £50,000 to £40,000, with the lifetime allowance cut from £1.5 million to £1.25 million.

As well as the tax it may generate, the Chancellor justified this by saying that the median pension contribution is £6,000 a year.

Experts have said that this decision has broken a Government promise not to cut the amount of relief until 2016 at the earliest.

Read Autumn Statement: Don't raid pensions, George for Ed Bowsher's thoughts on this.

Benefits

With the Government still very much in deficit, further welfare cuts were always likely. And that’s what happened, as most working-related benefits will only be increased by 1% from next April, rather than the 2.2% they were due to increase by.

However, Child Benefit will increase by 1% from April 2014.

Support for Mortgage Interest

After the credit crunch, the Government introduced Support for Mortgage Interest (SMI) payments to help borrowers cope with their repayments, and cut the threat of repossessions.

This help was due to be scaled back at the end of this year, but has instead been extended for another two years.

ISAs

The ISA allowance will be increased to £11,520 from next April, which is ahead of inflation, although only half of that amount can be saved in cash. There will also be a consultation on including shares in AIM-listed and other smaller market-listed companies in ISA offerings.

Capital Gains Tax

The Capital Gains tax threshold will be increased by 1% from April 2014.

Inheritance Tax

The Inheritance Tax threshold, currently frozen, will increase by 1% to £329,000 in April 2014.

More on Government policies

How to keep your Child Benefit

Government green plans to push energy bills up by £95

George Osborne proposes employee share schemes in return for rights

Benefit reform: all you need to know about the Universal Credit

Planning permission ditched for extensions and conservatories

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Comments (9)

  • RichardSowler
    Love rating 18
    RichardSowler said

    I think there is a typo in the 2013/14 personal allowance, which I understand to be £9440.

    Report on 05 December 2012  |  Love thisLove  0 loves
  • Simon Ward
    Love rating 8
    Simon Ward said

    Fixed. Thanks.

    Report on 05 December 2012  |  Love thisLove  0 loves
  • Arblaster
    Love rating 43
    Arblaster said

    This was balanced by an extra £235 increase in the tax-free Income Tax threshold to £9,440 from April. The Government has continually pledged to raise the threshold to £10,000 by 2015.

    The Liberal Democrats have had a good kicking of late, and rightly so, after what they did to the students. However, let's be fair. Raising the tax threshold to 10 Gs is an idea of the airy fairy people in the LDs. And it is a good one, which is the obverse of the 10 percent band income tax scandal of the last government. With the Income Tax threshold at 10 Gs, a lot of low paid and part time workers are relieved of income tax entirely, which is the way things used to be in the good old days, when income tax was the preserve of the middle and upper classes. And there are a lot of the workshy Gentlemen of England, such as myself, who live at home at ease on dividends, superanuations, and other forms of passive and residual incomes, who can live quite comfortably on £9,440 or less. But why stop at £10,000?

    This also means that with so many little guys taken out of income tax altogether, there will be no need for the Geheimsteuerspolizei at HMRC to employ so many feckless and rude staff. It would be nice to see these bullies queuing at the Cardiff Job Centres. I am sure they will look fetching in hoods.

    Report on 05 December 2012  |  Love thisLove  0 loves
  • Henry-GBG
    Love rating 57
    Henry-GBG said

    The income tax threshold should be based on earning the national minimum wage for 48 weeks a year, 40 hours a week, even if it means raising other rates of tax. National Insurance contributions should be subject to the same threshold.

    The Chancellor should be looking to raise additional revenue from the Business Rate, pending the much needed reform of the property tax system to replace all property taxes by a national tax based on annual rental values of sites alone ie ignoring the value of the buildings standing on the site.

    Report on 05 December 2012  |  Love thisLove  0 loves
  • SiGl26
    Love rating 26
    SiGl26 said

    Agree with Henry-GBG re the tax threshold; or even set it at the so-called 'living wage'... Then a flat-rate tax on all income above that level, whatever its source. Never understood why it's considered 'fair' to take a greater proportion of some people's income once you've got enough to live on

    Report on 06 December 2012  |  Love thisLove  0 loves
  • SiGl26
    Love rating 26
    SiGl26 said

    As for the cap on pension contribution relief, all it will do (as Ed Bowsher's linked article discusses) is discourage folk from saving... Don't forget, contribution relief is only a tax deferral; income generated by the fund is taxable when drawn. Limiting contribution relief is double-taxation...

    Yes, one has to have a great current income to afford this level of contribution; but if that has come about later in life due to earlier sacrifices and risk-acceptance, surely one should be permitted to catch up, up to the lifetime limit, as fast as one is able?

    As for me, I'd rather pay 52% now and spend what's left than pay 50% to lock it away for an uncertain future, subject to whatever tax regime is in force at the time.

    Report on 06 December 2012  |  Love thisLove  0 loves
  • oldhenry
    Love rating 343
    oldhenry said

    So this is a budget for 2014/15? What is teh point of tellingus now what he intends to 'give us back' in the form of reilefs, we need it now. The kicking of pensioners by Osborne will surely result in him being kicked in return in 2015. We know he'd dearly love to scrap the bus concessions and the miserable £100 fuel allowance. I suggest those are the first actions of a Conservative government if returned in 2015. But it won't be returned, there is no trust. Cameron promised a £1m inheritance tax threshold, instead he's kicked pensioners at every turn.

    Report on 07 December 2012  |  Love thisLove  0 loves
  • tuttogallo
    Love rating 99
    tuttogallo said

    This is all tinkering around the edges. Expenditure needs to be cut drastically and more tax taken in. The deficit is not falling nearly fast enough and the overall national debt is charging ever upwards.The country simply cannot afford the twin burdens of the NHS and Social Security Benefits.

    If interest rates rise then the whole edifice of government finances will come crashing down and a Greek style situation will arise. Don't think it couldn't happen here. It can!

    Arblaster. The German phrase you are looking for is: Ge(heime) Sta(ats)po(lizei).

    Report on 08 December 2012  |  Love thisLove  0 loves
  • hopefultom
    Love rating 50
    hopefultom said

    tuttogallo

    Surely, this should read "the triple burdens of the NHS, Social Security benefits and tax avoiders/evaders "

    Although the word burden is true in the literal sense, I wonder if many would consider the NHS in that sense. I know that I, and my family have many reasons to be grateful to the NHS staff, in various departments in our area

    Report on 10 December 2012  |  Love thisLove  0 loves

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