/ Money

The Autumn Statement 2012 – tax, pensions and fuel duty

George Osborne holding up the budget briefcase

George Osborne has delivered his third Autumn Statement amid a stagnating economy and a budget deficit that refuses to shrink. But how will the measures he announced today impact on your personal finances?

Five years on from the financial crisis, it seems Britain’s economy is still stuck in the mud. Economic growth is stumbling and despite widespread austerity, the UK’s deficit refuses to fall on target.

The evidence is plain to see – the UK’s economic growth for 2012 has had to be revised down from 2.5% to a shocking 0.7%. The Chancellor of the Exchequer, George Osborne, has announced a raft of measures to help people who are being squeezed by the economic crisis and to boost our flagging economy. But what measures could directly affect you?

Tax changes – a lifeline for consumers

One surprising move was an increase in the tax-free personal allowance – the amount you can earn before you pay any income tax. This will increase from £8,105 to £9,440. However, the level after which you pay higher rate tax (40%) will increase over the next three years by just 1% a year – slower than inflation. The government predicts this will raise an extra £1bn.

Welcome increases will also come to Isa limits (up to £11,520 from next tax year), which means you’ll now be able to put £5,760 into a tax-free cash Isa, compared to £5,640 currently. In addition, the limits for capital gains tax and inheritance tax will be increased in 2014. Meanwhile, the government will offer a grant to local authorities in England who reduce or freeze their council tax.

Another victory for consumers will see the proposed increase in fuel duty scrapped altogether. Fuel duty was due to increase by 3p in January, but the Chancellor has kicked that to the curb – good news for the 85% of consumers who said they were worried about fuel prices in Which?’s latest consumer insight tracker.

A mixed bag for pensions

But there were some major changes announced for those saving for retirement – some good, and some bad. First, the good news. The state pension is due to increase by 2.5% to £110.15 in line with inflation. Meanwhile, those who leave their pension savings invested after retirement in a scheme known as income drawdown, will be able to receive a much higher income in the future thanks to changes brought in by George Osborne.

However, the biggest source of discontent will be the reduction of the maximum tax-free contribution to a pension from £50,000 a year to £40,000 a year. The Chancellor stated that just 1% of earners contribute over this limit, and it was time for the rich to pay their fair share.

So what do you think of the major announcements? Are you convinced that the government’s done everything it can to help you and your finances?

Do you think the Autumn Statement 2012 will have a positive impact on your finances?

No (59%, 170 Votes)

Yes (26%, 75 Votes)

I don't know (14%, 41 Votes)

Total Voters: 287

Loading ... Loading ...
Comments
Member

He’s just tinkering nothing more, he should of made it possible to invest cash to the whole limit half than just half.

I’d like to see more cutting of needless MPs expenses. If anyone here has to commute large distances they’d be expected to pay travel costs and/or rent out of their own pocket. And if they can’t get their work done 9-5 then again that’s their problem, less squabbling and more working. And what’s with cutting jobs ? That’s the easy way to go, but it doesn’t help make government purchasing any more efficient. The NHS is overpaying for many things as are probably most government departments. That should be looked at. Yet it doesn’t seem to be

Member
Stuart Aken (@stuart says:
6 December 2012

A small, but important point, folks. Your survey question is ambiguous. Does it mean ‘positive’ in the sense that it will make things better, or does it mean that it will actually impact on personal finances? A better question might be: ‘Do you think the Autumn Statement 2012 will have a positive (good) impact on your finances?’ I suspect the answers will be very different.

Member

Taken on board and the question has been tweaked. Thanks

Member
Rico says:
6 December 2012

I’m convinced that the government refuses to legislate against banks and other creditors

Until it does so, many consumers will continue to suffer.

Interest rates need to be capped at a sustainable level. Less than 20% APR anyway.

Member

We have had profligate over-spending by previous governments, excessive personal borrowing, silly mortgage lending fuelling house price increases, complex disastrous trading by the banks that they did not understand any more than us, and much of the rest of the world facing slowdown in growth.
How do we expect to see a sudden revival in our economy (“shocking” economic growth 0.7%? Try Spain, Greece for shocking. Let’s hope it is 0.7% – at least it is positive). We can’t borrow our way out – that’s how we got in – so must accept a reduced standard of living until we recover.
Most of the Chancellor’s measure seem sensible; £40 000 pa pension contribution with tax concession still seems excessively generous – that’s a big contribution from the rest of society. I’d favour it limited to basic rate tax. But I’d also like to see more fairness generally – not that it would raise much cash, but we would be less irritated by inequity: high payoffs for people who lose jobs through incompetence or inadequacy (redundancy for the rest is very modest – why does the public service treat it differently) and better equality of public v private pensions.
Will I suffer – by cutting back on non-essentials, I suppose that might be suffering but I can cope. Those with small incomes or genuinely in need of benefits may need help – and this is where some redistribution is needed – a problem for a universal benefits system which does not discriminate well between the needy and those less responsible.

Member

Re: tax relief on pension contributions.
Yes – it should be limited to the basic tax rate (20%).

The annual allowance of £40,000 is less important than the lifetime allowance which will be £1.25 million from 2014/15. At current annuity rates (Hargreaves Lansdown) of £3,500 per £100,000 at age 65 (single life with RPI increases), this targets a retirement income of about £42,000 (+ state pension of £5,000).
So, a worker on minimum wage is paying income tax to subsidise a very generous retirement income.
I would have thought pension tax relief should subsidise a target of £25,000 at most – that should be enough to keep someone from being a burden on the state.

Bonkers

Member
Alan H says:
7 December 2012

Is the personal allowance for the over 65’s to be increased or if not it will be just another hidden backdoor method of hitting pensioners just like there has been in the last few budgets.

Member

I’ve always failed to understand why increasing the personal income tax allowance for under-65s is regarded as hitting (state) pensioners – since (state) pensioners still have a higher allowance.
Please explain.

Member

Tax-free allowance annual limit as to age
by 5 April 2012 – 65 to 74 – is £9940
….has there been an increase in the Autumn
Statement?

Member
Jeff says:
8 December 2012

I sometimes struggle to continue reading when writers misspell a word. I know that it is a little pedantic of me but “the Chancellor has kicked that to the curb” is meaningless. Surely, as the subject is to do with motoring it should read ‘the Chancellor has kicked that to the kerb’.

Member

You are correct – it is a little pedantic.
The phrase “kick to the curb” seems to be yet another Americanism, so perhaps it is appropriate to keep the word “curb” so as not to fully incorporate the idea into UK English.

Member

Argonaut – as I understand it, the personal tax allowance for 65-74 year olds in 2012-13 is £10 500 up to an income limit of £25 400. Then for every £2 extra income, £1 is deducted from the allowance until it reaches the basic £8105. This basic allowance will increase in the next year or two, but the age related one will not, until they are equal.

Member

Thanks, Malcolm… eventual equalization
with old fogeys eh….