This week the Chancellor of the Exchequer, Alistair Darling, delivered his Pre-Budget Report to Parliament but what is the 'PBR' and what does it actually mean for your finances? We explain...
What is the Pre-Budget Report?
Each and every year the Chancellor delivers two economic forecasts to Parliament on behalf of HM Treasury. The Budget Report, which is typically announced in March or April, and the Pre-Budget Report which is delivered some time in November or December.
While it's easy to dismiss both reports as 'boring politics' the contents of each will actually have a significant impact on your money for the year ahead.
In his Pre-Budget Report the Chancellor will typically update Parliament on the country's economic process since the official Budget announced earlier in the year. He'll update them on how the national economy and the Government's finances are faring and set out any new measures he plans to implement when he announces next year's Budget.
The economy: The good news is that the Chancellor expects the UK economy to finally pull itself out of recession and back into growth by the end of this year. While this doesn't have a direct impact on your finances in the short term it is reassuring to know that things are hopefully going to start getting better.
Savings, ISAs and Pensions:
- Plans to increase the ISA allowance to £10,200 for all savers (with a £5,100 Cash ISA maximum) as of 6th April 2010 were confirmed. Those over the age of 50 can already take advantage of this increased limit.
- The basic state pension will be increased by 2.5% in April 2010. This equates to a weekly increase of £2.40 to £97.40 for a single basic rate pension and a £3.85 weekly increase to £156.15 for the full couples' basic rate pension.
Tax:
- Those who earn more than £20,000 will see their National Insurance contributions rise by 1% in April 2011 (the Chancellor announced a 0.5% on top of the 0.5% rise announced in the 2008 Pre-Budget Report). The change will apply to employees, employers and the self-employed alike.
- The VAT cut we've enjoyed for the past year will come to an end on 1st January 2010 when we'll see a 2.5% rise in prices as the 17.5% VAT level returns.
- Similarly, the Stamp Duty holiday for people who purchase a property for less than £175,000 will end and the threshold will return to £125,000.
- There will be a one off tax of 50% applied to all discretionary bank bonuses over £25,000; this will be in addition to income tax.
- The Chancellor also announced that the Inheritance Tax Threshold will be frozen at £325,000 until at least 2011.
- Pension tax relief will be reduced from 40% to 20% for individuals with incomes of £150,000 or more including employer pension contributions. However, the Chancellor stated that no one with an income of less than £130,000 will be affected.
- There will be a 50p a month tax on landline phones to help fund the development of a superfast broadband network.
- The duty on bingo will be cut from 22% to 20%
Tax Credits, Benefits and Allowances
- Inflation-linked benefits will rise by 1.5% in 2010. This includes Child Benefit, Guardian's Allowance, Working Tax Credit (apart from any elements relating to childcare), Working Tax Credit not taken into account when calculating Housing Benefit and the disability elements of Child Tax Credit.
- The child component of Child Tax Credit will also increase by £65 next year.
- Around 500,000 extra primary school children from low income families will benefit from free school meals.
- The Mortgage Interest Scheme currently in place to support those who are facing repossession will be extended for another 6 months.
- The Warm Front scheme that helps to subsidise heating and insulation for low income households will receive an additional £150 million worth of funding.
- A Boiler Scrappage scheme will also be introduced in April 2010. This will provide around 125,000 low income homes with grants of up to £400 to replace an old, inefficient boiler with a new model that will help them to cut the cost of their energy bills.
Employment:
- All individuals aged between 18 and 24 will receive a job offer, training or a work placement after they've been receiving Jobseeker's Allowance for 6 months.
- There will also be additional help through Jobcentre Plus for individuals over 50 who are looking to return to work, financial support for low-income workers and an internship scheme for undergraduates from low income backgrounds.
Environment:
- If you have installed 'green technology' in your home you'll no longer have to pay tax on any amount you receive for selling it back to the main supply under the Clean Energy Cashback Scheme.
