Budget 2015 basics – the six things you need to know

Will it make a difference to you?

Last Wednesday saw the chancellor reveal his fifth budget, and the last one before May’s General Election. It wasn’t the “giveaway” that many had predicted, and behind the gags aimed at Ed Milliband, most of the changes announced won’t be relevant to us normal folk, at least not on a day-to-day basis.

There were a few changes though that it’s worth knowing about – here are my top six.

1. Less tax for savers

At the moment you pay 20% tax on most of your savings (40% if you are a high earner). It gets automatically deducted by your bank and pretty much the only way to avoid this is with an ISA.

From April next year, everyone will be able to make £1,000 interest tax-free in normal accounts. I’m always going on about making sure you’re using the high interest bank accounts to get the most cash, and this means you’ll make even more.

The question is, will anyone need an ISA after this? £1,000 is a LOT of money to make on savings (eg you’d need £50,000 at 2%).

If you do have an ISA, another change this autumn will mean you’ll be able to withdraw money and then pay it back in without it affecting your £15,240 allowance. This is a good thing!

There’s also going to be a new Help-to-Buy ISA for any first-time home buyers. From the autumn, the government will top up savings in these accounts by 25%, up to a maximum of £3,000. You’ll only be able to save a maximum of £200 a month and it would take over four years to save the max possible. Still, it’s free money if you fit the criteria.

If you have money to save, you can read my thoughts about whether you should get an ISA or a high interest current account.

2. Less tax for workers

We already knew that the amount of money you earn before you pay Income Tax (called the Personal Allowance) will go up from £10,000 to £10,600 this April. In this Budget, the chancellor announced that it’ll go up by another £200 next April, and £200 again the year after. Each £100 it rises is worth £20, so by 2018, that’s an £200 we’ll all take home in our paypack.

The minimum wage will go up by 20p from October, good news for any low earners.

If you are a “Higher-earner” – basically anyone who currently earns more than £41,866 – you have to pay 40% tax on earnings over that amount. From April this won’t kick in until you earn above £42,385, which means you’ll pay £104 less in tax. It’ll go up again to £43,300 in April 2017.

If this all sounds confusing, I’ve written a guide to explain your payslip.

3. Less tax for drivers & drinks, more for smokers.

A planned petrol tax increase due in September has been cancelled. That’s meant to be worth around £10 a tank.

Beer will be 1p cheaper a pint, while the tax on cider and spirit will go down by 2%.

Just because both will be cheaper doesn’t mean you should be doing it at the same time!

Smokers though will still have to pay more as the already planned rise will go ahead.

4. There’s a new £1 coin

From 2017 we’ll all be using a 16 sided coin rather than the normal rounds ones. It’s to tackle forgeries. Though I’m pretty sure vending machine and supermarket trolley companies won’t be too happy!

5. More freedoms for people with a pension

From next year, anyone who has already cashing in their pension pot and bought an annuity will be able to sell it for a cash lump sum. Whether that’s a good idea or not is another matter!

6. Less hassle for anyone who fills in a Self-Assessment tax return

They’re going to gradually replace these with digital accounts, hopefully making it a lot easier for people to work out how much they owe. It’ll start in the new year but take five years to finish.




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