Budget boost for savers
–Fay Goddard is chief executive of the Personal Finance Society. The opinions expressed are her own.–
As predicted, Budget 2009 was heavy on figures and forecasts and hard on the highest earners. Unsurprisingly it is the latter that the press has picked up on. We all knew that there would be a new top rate of income tax – though some were taken by surprise at the rate of 50 percent and the speed at which it will be introduced.
This wasn’t the only hit taken by those on big salaries with restrictions on pension tax relief for those on over £150K and personal allowances for those earning over £100K. These changes will be of concern and mean that financial advisers will need to review the position of their affected clients. However, advisers will have breathed a sign of relief as the rumoured removal of all higher rate tax relief on pensions did not materialise.
There was better news though for savers. The rise in ISA limits is a welcome move and will be available immediately for those over 50, with everyone else having to wait until next year. Whilst I assume this is aimed at providing some immediate assistance to those who rely on their savings to generate income, with interest rates so low, the increase will not deliver much benefit. At least some pensioners will also receive additional tax credits though.
Help for families came in the form of increased child tax credit, and for those who lose their job in these troubling times statutory redundancy pay has been increased.
Those looking to buy houses under £175K will continue to benefit from the stamp duty holiday – this was extended by a further six months until the end of the calendar year but there was little else to stimulate the housing market.
In terms of more direct measures there was the ubiquitous raise in alcohol and tobacco duty and also the rise in petrol duty. The VAT rate cut will end in December as announced in last year’s Pre-Budget report and so VAT will revert back to 17.5 percent. None of these will be sufficient to top up the Chancellor’s coffers quickly but could further reduce spending for middle England.
This was certainly a Budget for the times with the Government looking to replace revenues lost in the downturn and as I said prior to the Chancellor’s speech it’s the first step towards universal belt tightening.