The average UK household will be £200 worse off under new tax changes made in the 2011 budget, which is announced today.
According to the money education charity Credit Action, a total of 45 significant changes will come into force in April covering income tax thresholds, national insurance contributions, tax credits and child benefit as well as the fuel duty rise if it goes ahead.
Many tax changes about to hit taxpayers’ pockets have already been pre-announced. The best that can be expected is a reversal in the planned 1p rise in fuel duty and the introduction of a fuel duty stabiliser that will help reduce the impact of oil price rises on fuel prices at the pump.
But many people will still suffer a net loss of income after other tax changes take effect on April 6.
The average household will be £200 worse off after these changes, according to the Institute for Fiscal Studies, adding to the average increase in out-goings of £480 following the rise in VAT that came into effect at the end of January.
Among the changes taking place in the new tax year will be a £1000 increase in the personal allowance to £7,475 for those aged under 65.
However, the decrease in the threshold at which higher rate tax is paid will mean that some 750,000 more people in the UK will end up paying tax at 40p in the pound when their earnings reach £42,475 instead of £43,875, which will cost them an extra £280 a year.
According to HeraldScotland.com, KPMG accountants calculate that a retired couple with a small occupational pension could be £82 better off, whereas a couple in their late 30s where the woman is earning £50,000 per annum and the man stays at home to look after the children will be £834 a year worse off. This is due to the removal of the family element of child tax credit and the one per cent increase in national insurance contribution rates.
If fuel duty increases as planned it will cost them a further £35.
Vance Parsons, Sales Director at Eurodebt, said: “Individuals and families who are already facing financial hardship will be further disadvantaged when the new tax changes come in to effect.
Families who pay for childcare and are eligible for help towards these costs will see this support cut by ten per cent. Tax relief on childcare vouchers is also to be restricted to the basic rate and child benefit is being frozen.
“Experience tells us that a reduction in income of any amount can seriously affect the ability to meet priority obligations such as mortgage repayments or rent whilst meeting repayments to unsecured creditors; consideration should therefore be given to seeking advice on all debt related issues with a licensed debt advisor before the pressure becomes too much to bear,” he added.
The industry calculates there will be a 6.8 per cent tax increase on alcohol if the Government plans go ahead.
Andrew Hubbard of accountants RSM Tenon told HeraldScotland.com: “We expect to hear lots of comments on the Government’s plans to overhaul current outdated tax systems to make them simpler and more relevant to the modern world.”
There have also been calls for the Government to reform stamp duty which currently ranges from one per cent for properties starting at £125,000 to a new five per cent rate coming into effect for properties of more than £1 million on April 6.
First-time buyers are at present benefiting from a two- year suspension of stamp duty on properties of up to £250,000 which ends in March 2012. The Building Societies’ Association has called for this to be made permanent.
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