FINANCE

The Budget - the good bits

Confused by changes to tax brackets, benefits and duty? Read Jamies Crampton’s easy guide

All eyes were on Chancellor George Osbourne a few months ago as he announced the 2011 Budget – the new coalition Government’s first.

As in previous years there was a mix of good and bad news, mostly depending on how much you earn and what your personal circumstances are.

There were changes to many different types of tax (43 in fact) and I won’t even attempt to cover all of them in this article, mainly because for most people the likelihood of coming across them is fairly remote. The headline grabbing change was the postponement (and note that it IS only postponing – not cancelling) of the proposed “uplift” in fuel duty. You may have read that is was to be a penny – this is untrue, the rise that would have taken place was a penny PLUS an inflationary increase, depending on the rate of inflation at the time, on the duty element of the price of a litre of petrol. At the moment this is hovering around 4% - so a short calculation means that the rise would have consisted of around 3p for inflation, plus 1p, plus another 1p for additional VAT – meaning a total of 5 pence. As I said this has only

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12 Boxgrove Priory, Bedford MK41 0TQ. Registered with the Chartered Institute of Management Accountants as a Member in Practice.

been postponed and, unless things change, will be actioned in 2012 – so beware! The £1.50 litre is slowly coming over the horizon...

For Income Tax and National Insurance the best news was that the standard allowance for everyone was increased to £7,475, meaning there is no tax to pay on the first £7,475 earned in a tax year – whether self employed or as an employee.

The next £34,800 is taxable at 20%, and anything above that is now taxed at 40%. So to reach the 40% bracket one has to earn £42,275 – however, this is actually a decrease on the previous year where the 40% bracket kicked in on earnings above £43,875 – a decrease of £1,600.

With National Insurance it’s a similar story. The threshold at which an employee starts to pay National Insurance has been raised, to £139 per week, or £7,225 per year. The rate of NI has now been increased by 1% to 12%.

For self employed people there are two rates of NI – a weekly class two self employed contribution of £2.50 which anyone with self employment must pay, and a class 4 contribution based on profits from self employment which is now, 9% on profits from self employment in excess of £7,225.

As usual you should always seek professional advice from a qualified accountant on all tax matters.

THE AUTHOR Jamie Crampton qualified as a Chartered Management Accountant in 1995 and in 2008 set up Accounting 4 Fitness, dealing with clients in the fitness industry. In addition to

this he advises personal training students on setting up in business and works with accounting students at the University of Bedfordshire in Luton.

24 The REPS The REPS Journal 2009;00(Month):00-00 The REPs Journal 2011;21(June):24-25