Budget 2012: What's in it?

George Osborne's Budget increases personal allowance, a move welcomed by the Association of Christian Financial Advisers.

They are concerned, however, by the phasing out of age-related benefit, saying that this penalises those who have contributed the most to society.

The changes to child benefit look set to be "expensive" and riddled with "red tape", the ACFA further warns.

The group is also "disappointed" that the Chancellor did not include stricter regulations on payday loans.

The ACFA's Arwyn Bailey said: "The Chancellor has had a difficult balancing act and only time will ultimately tell whether his fiscal policy will be effective in assisting the lower income groups, and raising sufficient tax revenue to fund the reduced public spending programme.

"Encouraging growth, whilst reducing debt and developing personal responsibility is a tall order."

He breaks down the Budget and offers his opinion on what some of the changes could mean.

1. Personal Allowances:

Personal allowance increased significantly toward the £10,000 figure. Age allowances for the elderly are also to be phased out.

This increase is very welcome news and a good reflection of a caring society. However, abolishing the benefit given to those who have contributed to society the most throughout their lives, seems to be a little harsh, and is possibly hidden behind the need to simplify taxation in retirement.

2. Child Benefit to be Phasing:

When someone in a household has an income of more than £50,000, child benefit will be cut by 1% of every £100 earned above £50,000. Those earning more than £60,000 will lose the benefit entirely.

Assisting those on lower income is a good ideal as: “It takes a whole village to raise a child”. An effective “means testing” of this benefit for middle-earners appears to be fair. However, our worry is how will this “test” be administered and will it bring more complexity. Red tape often means cost.

3. 50% Tax Rate:

As expected, this rate of tax will be reduced. It will be 45% from April 2013.

What has not be said, thus far, is that most employees pay NI, and therefore the tax rate is already above 50% for more than the top 1% earners whose income is around £150,000 or more.

4. Tax Avoidance:

As expected, a severe clampdown on certain avoidance schemes was announced.

There is no reason why a property, held within a pseudo company, should escape stamp duty. The announcement today effectively makes this type of scheme too expensive to be tax-efficient.

5. Corporation Tax Cut:

The rate is to be cut, from April 2012, to 24%, and by 2014 it will fall to 22%. Banks will not benefit from this decrease, as their levy will be increased to compensate for the reduction. There was also the announcement to simplify tax systems for small firms with a turnover less than £77,000.

Encouraging and stimulating growth, especially for SMEs, is welcome news, especially at this time. Less administration is also welcome, as small businesses need to be freed up from excessive regulation and red tape.

6. Single Tier State Pension:

There is to be a simplifying of the state pension for future pensioners. Income will be set at about £140 a week and will be based upon contributions.

Benefits should not only be based upon what someone pays in. There is a need to also pay out when someone is in need, irrelevant of their fiscal contribution.

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