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What does the Budget mean for Skinted and Minted Mums?

budget2018The end to austerity was announced yesterday by the Chancellor of the Exchequer, Philip Hammond, as he set out the spending plan for the UK for the year ahead. That means more money for schools, health, social care and even fixing potholes. But how will it affect those of us running somewhat smaller households than Mr Hammond’s?

The major uplift for 32 million of us is a tax cut. The threshold at which you start paying tax will be £12,500 from April next year, up from £11,850 now. Similarly, the higher rate of tax will be applied to earnings over £50,000, up from £46,350 now. That’s a big tick for both skinted and minted mums who will save an average £130 a year (basic rate taxpayer) or £860 a year (higher rate) according to accountants Deloitte. However, some of the gain for the higher rate payers may be clawed back in increased national insurance, some experts think.

Meanwhile the tax on capital gains, if you’re lucky enough to have them, goes up by £300 to £12,000 a year.

Mr Hammond was a bit mean with tax perks on savings with most annual allowances staying put. The exceptions were the Junior Isa limit going up in line with inflation to £4,368 and the lifetime pension allowance rising to £1,055,000. (I don’t think I’ll be hitting that ceiling.)

There was potentially bad news for self-employed mums. The IR35 rules will now be applied to private sector workers from April 2020. This means businesses may have to deduct tax and national insurance (NI) from payments to freelances and contractors rather than leaving them to self-declare. If you’re off payroll, expect higher NI bills to come. And on that subject, any changes on class 2 NICs have been delayed.

While it all sounds headline-grabbing, at SMM we’re not convinced it’s much more than sweeteners. Paying less tax is great, as is more money for public services - if it amounts to more than a sticking plaster. But it’s still hugely expensive to fill up the car even with fuel duty frozen while housing costs continue unchecked.

My skinted colleague Charlotte has crunched her own figures on this useful BBC calculator and found the changes make little difference to her budget. And while I’m pleased that a tax on digital services and reduced business rates might prop up the high street, I would’ve liked to have seen more help for students and incentives for saving.

So I’ll be drowning my disappointment - in anything other than wine. It’s been singled out for a duty rise and fizzy will be 9p more a bottle, bah.

For help on saving on tax, see our SMM guide here

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Saturday, 15 December 2018