Here’s a look at how the Chancellor’s announcement will affect your finances.
Taxes
All employer, employee and self-employed National Insurance (NI) contributions (a tax by any other name) will rise by an extra 0.5% in 2011. That’s on top of the 0.5% hike already planned – so that’s 1% in total from 6 April 2011. However, the starting thresholds have been adjusted so that those earning below £20,000 won’t have to pay increased NI.
As expected, VAT will go back up to 17.5% in January 2010 after being reduced to 15% for the past year. The starting threshold for paying stamp duty on property will also – as expected – fall back from £175,000 to £125,000.
The inheritance-tax threshold will remain at £325,000 for the next 12 months. It had been due to rise to £350,000. Married couples (or those in civil partnerships) are still allowed to combine their IHT allowances.
The starting point for paying 40% income tax will be frozen for one year from 6 April 2012.
There will also be a new tax introduced, with the aim of funding the installation of ‘super-fast’ broadband for 90% of the population by 2017. If you have a landline, you will have to pay a tax of 50p a month.
Pensions
As announced in October, the basic state pension will rise by 2.5% next April.
Restrictions on higher-rate pension tax relief for higher earners (which comes into play from April 2011) were extended from those on £150,000 a year or more, to those on £130,000 a year, as the government expanded the definition of relevant income to include employer pension contributions.
Benefits
Families receiving inflation-linked aid, such as child benefit, will enjoy a rise of 1.5% in the amount they receive.
Support for the mortgage-interest scheme, which helps unemployed people with their mortgage payments, will be extended by a further six months.
The Warm Front scheme to help people insulate their homes is going to be extended to 75,000 more homes; a boiler scrappage scheme will help people replace their old domestic boilers.
The government will offer financial support to 10,000 undergraduates from poor backgrounds to take up internships, while 500,000 more low-income families will get free school meals.
Electric cars will be exempted from company-car tax. And if you have a wind turbine or solar panel on your home and you sell excess electricity back to the national grid, you will be able to earn as much as £900 a year tax free.