The Autumn Statement 2012 – tax, pensions and fuel duty

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?

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