Budget 2013: Winners and Losers

Posted on March 20th, 2013 | Categories - News

Investment Sense Verdict_istockToday’s Budget included a wide range of measures which will affect us all; but were you a winner or a loser?

For once there seems to be more winners than losers. However, with so many announcements, changes and alterations it might be a case of ‘swings and roundabouts’.

Read on to find out if you have gained more than you have lost.

Winners

Tax-payers

The Personal Allowance, the amount which can be earned before tax is paid, will increase to £10,000 from April 2014, a year earlier than was previously planned.Smile face icon

Although primarily aimed at low paid workers it seems as though this change will benefit all taxpayers.

Businesses

Businesses were major winners from the Budget.

Firstly Corporation Tax will be cut by 1%, to 20%, from April 2015 and secondly, a new ‘employment allowance’ will mean employers will not have to pay the first £2,000 of employer National Insurance contributions.

Investors in small companies

Extensions to the existing Small Enterprise Investment Schemes (SEIS) were announced by the government; such schemes offer large Income Tax and Capital Gains Tax breaks for investors in small companies.

Shares traded on growth markets, such as AIM (Alternative Investment Market) will now be exempt from Stamp Duty, which will reduce the cost of making such an investment.

Would-be retirees

The introduction of the single tier flat rate State Pension has been bought forward by a year to 2016, however the benefit could be offset by lower Annuity rates resulting from additional Quantitative Easing (QE), see below for more details.

Drivers

It was announced that September’s planned rise in fuel duty will be cancelled.

Beer drinkers

Reacting to the closure of 10,000 pubs over the past decade, the Chancellor not only abolished the beer duty escalator, he also cancelled the planned 3p rise in duty and actually went further by cutting duty by 1p.

Working parents

Although previously announced, Mr Osborne confirmed that he would introduce tax-free childcare vouchers worth £1,200 per child.

Mr Osborne said: “New tax-free childcare vouchers for working families: 20% off the first £6,000 of your childcare costs for each child. And increased childcare support for those low-income working families on universal credit.”

Homebuyers

George Osborne announced the ‘Help to Buy’ scheme aimed at helping people buy a new home.

Unlike other schemes which have been restricted to first time buyers, it seems that the ‘Help to Buy’ scheme will be available to all borrowers.

Although details are scarce it seems that the ‘Help to Buy Scheme’ will have two components. The first being £3.5 billion of shared equity loans of up to 20% of the purchase price. The loans will be available to anyone, not just first time buyers, buying a new build home, who put a 5% deposit down from their own savings.

The loans, which will be available to all buyers, irrespective of income, will be interest free for five years and repaid when home is sold.

The second component is a new £130 billion mortgage guarantee scheme, to help people who can’t provide a large deposit, and again will be available to all homeowners, but not limited to new build properties.

The ‘Help to Buy’ scheme will be available from 2014 and will run for three years.

Equitable Life

The existing compensation scheme extended to those people who bought With Profits Annuities before 1992. It was announced that these people will receive a one off payment of £5,000 and policy holders on low incomes or income credit will receive a further £5,000.

The Chancellor said: “We are now in a position to help those who bought a with-profits annuity before 1992. We will make payments of £5,000 to elderly policy holders and make £5,000 available for those on the lowest incomes and income credit. We are doing this because it is simply the right thing to do.”

Child savers

The Budget contained measures which will allow the six million Child Trust Funds (CTFs) to be transferred into Junior ISAs (Individual Savings Accounts).

CTFs were replaced by Junior ISAs in 2011 and have seen interest rates cut, to below those offered by the new product, however a transfer between the two was not possible; it now looks as though this will be changed and will allow child savers to get more competitive deals.

Losers

Public sector workers

The Chancellor announced that pay rises for all public sector workers, except military personnel, will be capped at 1% in 2015/16.

With inflation running at close to 3%, this will be an annual real terms pay cut for anyone in the public sector.

Would-be retireesSad face icon

People retiring over the next year or so could see the income produced by their pension fall if the Bank of England extends the existing Quantitative Easing (QE) programme, which will, in all likelihood, further depress gilt yields.

Both Annuity and Income Drawdown rates are linked to gilt yields and will fall if yields drop further on the back of additional QE.

Smokers and non beer drinkers

Whilst beer drinkers will be happy, people who consume other types of alcoholic drinks, or smoke, will be less enthusiastic as no reductions were made to the amount of duty they will pay.

Tax avoiders

The Government will name and shame companies or individuals who promote tax avoidance schemes, there will also be a consultation on new penalties for tax avoidance.

Low paid employees wanting to join a pension

All workers with earnings above a predetermined level will automatically be enrolled into a work place pension over the next couple of years.

The level of earnings required before auto enrolment takes place is linked to the Personal Allowance, with this rising to £10,000, there may be some low paid workers not offered the chance to save for their retirement when they would like to do so.

Were you a winner or a loser?

We’d love to hear what you think about the Budget, were you a winner or a loser?

Why not leave us a comment below?

If you want to discuss how you are affected by the Budget our team of Independent Financial Advisers in Nottingham are here to help.

Feel free to call one of our IFAs today on 0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk