Author: Dave Mills
The Chancellor Philip Hammond made headlines with his latest budget, which announced an increase in the personal income tax allowance from next April. The move, which means we all get to keep more of what we earn, was somewhat unexpected because the treasury had previously pencilled it in for the following year. As well as moving the starting point for income tax to £12,500, Mr Hammond announced he was shifting the higher-rate income tax threshold to £50,000. Workers will no doubt welcome the news, but what else was there in the budget related to people’s personal finances?
The Chancellor announced a continuing freeze on fuel duty, which means the price of petrol and diesel will only increase if the price of oil goes up and/or if the pound loses value.
He also told MPs there would be a freeze on duty charged for beer, wine and spirits, which is good news for drinkers’ personal finances.
In addition, there will be no changes to VAT, which remains at 20%.
The government will introduce new tax rules for large digital companies such as Google, Facebook and Amazon.
Mr. Hammond was keen to stress that this was a tax on the corporations and not a tax on people who use their services.
From April 2019 the National Living wage will increase to £8.21, which is good news for the personal finances of low-income earners.
However, the increase falls well short of Labour’s call for the government to increase the National Living Wage to £10 an hour and scrap age restrictions on when workers become entitled.
Mr Hammond also offered a helping hand to first-time buyers entering into shared-ownership agreements.
He announced that these buyers will pay no stamp duty on the first £300,000 of a home’s value, up to the threshold of a £500,000 asking price.
The overall performance of the UK economy has a massive bearing on people’s personal finances.
In his budget speech, Mr Hammond revised-up growth in the UK economy next year from the expected 1.3% to 1.6%. This was based on forecasts by the government’s Office for Budget Responsibility.
Last weekend the Chancellor admitted there would have to be an emergency budget if Britain leaves the European Union next year without a deal.
As a result, everything in October’s budget could be amended depending on the outcome of negotiations.
It has been widely reported that a no-deal Brexit could have devastating consequences for people’s personal finances.
David Mills from Compass said that while the budget generally seemed positive for people’s personal finances, some of the initiatives outlined could hit a snag or two. David commented:
“The new digital tax seems like a good idea, especially with our high streets struggling to compete with the likes of Amazon. But it seems likely that these companies will simply shift part, or indeed all, of the new tax burden onto the consumer.
“We also need to wait and see whether the cut in stamp duty for first time buyers in shared-ownership agreements translates to a rise in house prices in the affordable homes sector.
“But by far the biggest concern for personal finances is Brexit. This budget was drawn up on the assumption that we get a deal from the European Union before the March 29th deadline. Everything in this budget is contingent on a deal being struck between UK and EU negotiators,” he stressed.
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