Budget breakdown: tax rates and allowances
22 March 2012
by Luke Thomas
As ever, the Budget has brought with it a raft of changes to tax rates and personal allowances.
Perhaps the most controversial move is the drop in taxes for those earning over £150,000.
Arguing that the current rate of 50p out of every £1 earned “damages the economy” and raises “next to nothing” for the Treasury, George Osborne announced that the taxation on top earners was to drop to 45p. This led the Labour leader Ed Miliband to describe it as a “millionaire’s budget”.
There was also outrage at the changes to pensioners’ personal income tax allowances, which would bring them in line with those of working age individuals. Derisively referred to as a ‘granny tax’ by opponents, it will mean that retired people will start paying tax on their pensions at the same level of income as working people.
This means that an estimated 4.41 million pensioners will see an average loss of £83 on their yearly budgets.
HMRC stated that it was an attempt to “spread tax relief fairly across working-age people and pensioners”.
But shadow chancellor Ed Balls claimed to be “sort of baffled” by Osborne’s decision to “single out pensioners”.
As an attempt to help “working families” – stated as a major theme of this Budget – the income tax allowance is to increase by £1,100, raising the income level at which people start paying tax to £9,205 per annum. However, the point at which people are put onto a higher 40% tax rate will drop from £42,475 to £41,450, which will pull 300,000 more workers into this band.
The Budget also establishes council tax relief for members of the armed forces while they are deployed in other countries, who will save 100% on an average council tax bill.
Additionally, a new rate of stamp duty will be introduced, requiring people who purchase property for over £2m to pay 7% land tax, or 15% if purchased through a company – the latter being an attempt to crack down on a common stamp duty evasion method. The highest current rate of stamp duty tax is for homes worth over £1m, for which it is set at 5%.