The UK Budget unveiled by the Chancellor of the Exchequer, George Osborne, brings a welcome boost to pensioners and savers whose incomes have suffered with historically low interest rates. Tax-free thresholds for those saving in ISAs will increase, and pensioners are to get a higher interest option on their savings.
An ISA (Individual Savings Account) is a kind of savings account. Anybody in the UK who saves in an ISA can keep all their investment, including interest earned, without having to pay any tax on it.
People’s pension pots will no longer have to be used to purchase annuities.
Bingo tax has been cut in half, from 20% to 10%, petrol, spirits and cider duty remains the same, while a pint of beer will have 1 pence less tax. The tax levy on cigarettes, however, will increase.
Ed Miliband, the shadow chancellor representing the Labor opposition, said millions of Brits continue being far worse under the Conservative-Liberal coalition.
Highlights of the 2014 UK Budget
In his fifth budget speech Mr. Osborne announced:
- All long haul flights will carry the same tax rate as that charged for flights to the United States.
- Companies that buy homes worth more than £500,000 will have to pay an extra 15% on stamp duties.
- Duty on cigarettes will be 2% higher than inflation.
- Export boosting scheme financing to be doubled to £3 billion.
- Flood defenses and pothole repairs and maintenance are to receive an extra £140 million.
- Members of emergency services will not be liable to inheritance tax.
- Structural welfare spending will be capped to its £119 billion limit (2015 total), and will only increase according to inflation. Job Seekers Allowance and pensions are not included.
- The ‘carbon floor’ price paid by businesses will be frozen.
- The Help to Buy Scheme will be extending for those wishing to own their own homes to 2020.
- Employees’ tax free income will increase from £10,000 to £10,500.
- Cash and share ISAs will be merged into one New Isa with a £15,000 annual tax-free savings limit.
- Junior ISAs’ limit will increase to £4,000.
- Pensioners will be able to opt to cash in any amount of their pension pot without having to buy an annuity.
- Everyone over 65 will be entitled to enter a Pensioner Bond savings scheme, which pays 2.8% annual interest for 1-year bonds and 4% for 3-year bonds. These will become available on January 1st, 2015.
- The ownership limit on Premium Bonds will rise from £30,000 to £40,000 in June 2014, and then to £50,000 next year. There will be twice as many £1 million Premium Bond winners.
- The higher rate of income tax threshold will increase to £41,865 in April 2014, from the current £41,450. In 2015, this will rise to £42,285.
A giveaway without spending much
The center-right British newspaper, The Telegraph quotes Martin Lewis, a ‘money-saving expert’, who said of the Chancellor regarding ISAs “He’s managed to do a giveaway without it costing him very much money at all before the next general election. The reason for that is quite simple. Even a year ago the best buy easy cash ISAs were paying 2.75%. Now they pay just 1.65%. So increasing the ISA limit isn’t actually giving that much away.”
Regarding the higher amount of Premium Bonds people may own, Lewis was not impressed. Although it may sound like a good thing, he warns that far fewer people might win overall.
In a 6-people panel in the center-left British newspaper The Guardian, Richard Murphy described Osborne’s budget as a rearrangement of deckchairs for political advantage, Melissa Kite saw a man focusing on being re-elected, Matthew Wittacker said those on middle incomes had little to get excited about, Ruth Porter complained that it is not enough to simply tinker around the edges of pensions, Ben Southwood described it as a boring, centrist budget disguised as a push towards radical pension reform, and Will Hutton said “(the) budget was less than the sum of its parts.
The beer and bingo Budget
A Conservative advert preceding the Chancellor’s well-received Budget appears to have backfired, as Labour, Liberal Democrats and even a wife of a Conservative cabinet minister branded it as patronizing.
The Conservative Chairman, Grant Shapps, tweeted out a message highlighting the tax cuts on bingo and beer, and added that they were aimed at helping hardworking people do more of the things they enjoy.
In the BBC’s Newsnight program, Danny Alexander, the Liberal Democrat Treasury chief secretary said “I thought it was a spook at first,” and then went on to say he found it rather patronizing.
The backlash from the advert does not help the Tories who have been accused of being dominated by old Etonians (they went to the supper-preppy Eton school) who are unable to appreciate how millions of people throughout the country have suffered during and since the Great Recession with falling living standards.