Autumn Statement 2012: personal finances
A freeze in fuel duty and a decrease in the annual pension allowance were amongst the announcements affecting personal finances made by Chancellor George Osborne in this year’s Autumn Statement.
Delivering what he described as ‘fair’ measures against the latest downgraded economic growth forecasts from the Office for Budget Responsibility, the Government said it would ensure ‘that it pays to work’ and that it will ‘support pensioners and those most in need, and deliver a progressive tax and welfare system that is affordable and encourages growth’.
The Chancellor committed to supporting those on low and middle incomes by increasing the personal tax allowance by £235 in April 2013 to £9,440. It accelerates the Government’s drive to make the first £10,000 of income free from income tax as pledged. The Government estimates the move could benefit 24.4 million people and lift a quarter of a million people out of income tax altogether.
Elsewhere, the higher rate threshold for income tax will also rise by 1 per cent in 2014, from £41,450 to £41,865, taking 400,000 people into the higher rate tax band. It will rise again to £42,285 in 2015.
Pensions and savings
In the Government’s continuing drive to ensure that everyone pays their fair share of tax, the maximum annual pension contribution allowance will decrease from £50,000 to £40,000 affecting the top two per cent of individuals. The lifetime allowance for pension contributions will also decrease from £1.5 million to £1.25 million from 2014/15.
The basic state pension will also increase by 2.5 per cent – higher than average earnings and inflation – a rise of £2.70 a week in 2013/14. The additional state pension will rise in line with inflation and prices. Elsewhere, the capped drawdown limit for pensioners will increase to 120 per cent of the value of an equivalent annuity.
In savings, the annual Individual Savings Account (ISA) allowance will be uprated to £11,520 in April 2013 as planned, although a consultation will be launched into extending the qualifying stocks and shares when investing ISAs into stocks and shares.
Welfare and benefits
Most working age benefits and tax credits (excluding disability and carers benefits) will increase by 1 per cent for the three years from April 2013.
Capital gains, inheritance tax and stamp duty
The annual amount exempt from capital gains tax will increase by 1 per cent to £11,100. The inheritance tax nil-band rate – currently frozen at £325,000 – will increase by 1 per cent in 2015-16. There will however, be no increase in the current rates of stamp duty land tax.
The 3p increase in fuel duty planned for January 2013 has been cancelled.