Autumn statement: how are families and individuals affected?
Council tax cuts for ‘granny annexes’ and the demise of the tax disc are among the surprises in the chancellor’s announcement.
The state pension age rising to 70, £50 off energy bills and £700 worth of income tax breaks were at the centre of a no-surprises autumn statement of which all the main measures for families and individuals were trailed days or even months before.
But amid the hundreds of pages of dense documentation that accompanies every autumn statement, there were a number of small surprises. Granny flats (or what the Treasury calls “property annexes”) will see a 50% cut in council tax. The amount that can be invested in an ISA rises to £11,880, while motorists, already benefiting from the freeze in fuel duty, will be able to pay excise duty monthly instead of annually. As part of that change, paper tax discs are to be scrapped, after more than 90 years attached to car windscreens.
Missing from the autumn statement were figures on welfare benefits, tax credits and child benefit. Under the Welfare Benefits Uprating Act passed earlier this year, rises in most benefits no longer go up by the rate of inflation but are capped at an increase of 1% until 2016. So Jobseekers Allowance, currently £71.70 for the over 25s who have a record of paying National Insurance, should on that basis rise to £72.42 – an increase of 72p, or enough to buy a tin of Heinz baked beans at Tesco and still have 4p left over.
In the 2010 budget, Osborne said child benefit rates would be frozen for three years, taking effect from April 2011. Since then, the rate has been £20.30 a week for the first child and £13.40 for the second or more. Nothing was mentioned about child benefit in the autumn statement, but assuming the provisions of the Uprating bill are applied to child benefit from April next year, expect another 20p for the first child and 15p for the second.
The basic state pension, currently £110.15 a week, will rise by 2.7% – the rate of inflation – to £113.10. George Osborne also confirmed that the state pension age will rise to 68 nearly 15 years earlier than originally planned, starting for people retiring in the mid-2030s, rather than 2046. It will then rise again to 60 by the late 2040s, and 70 in the decades after that, saving £500bn from pension expenditure over the next 50 years. “We have to guarantee that the basic state pension is affordable in the future, even as people live longer and our society grows older. The only way to do that is to ensure the pension age keeps track with life expectancy,” said Osborne.
But a spokesman for annuity provider Partnership said: “Today’s revisions around the state retirement age suggest that someone who is 35 now could conceivably need to work for eight years longer than one of their parents before they receive a state pension. This seems a heavy burden for a generation that arguably is finding it tougher to buy their first home, secure a career and is more indebted than many of the baby-boomers.”
The chancellor announced further details of the new tax break for married couples and civil partners. The plan is to make up to £1,000 of a person’s income tax personal allowance transferable between adults who are married or in a civil partnership, so long as the higher income adult is a basic rate taxpayer, starting in April 2015. The typical saving is expected to be around £200 a year.
An example which illustrates the new system uses a man earning £30,000 with a wife earning £6,000 a year working part time. She has a personal allowance, expected to be around £10,230 in the year the policy is introduced, but is not using it all.
She can transfer £1,000 of this to her husband, lowering his tax bill by up to £200 a year because he’ll no longer have to pay 20% tax on that £1,000. This saving works out at £3.85 per couple per week. But the value of the allowance tapers out once the lower earner starts earning more, and it will not be paid at all if one of the couple earns more than £42,000.
Robin Williamson of the Low Incomes Tax Reform Group said: “Pensioners in particular should benefit, as should working couples where one partner stays at home to look after the children.
“Nevertheless, the tax saving (£200 maximum) is small and, like the personal allowance itself, the value can be eroded if the couple is in receipt of means-tested benefits because entitlement to them is based on net, after-tax, income. But the principle is right and the chancellor commented that this was only a start.”
One household that will enjoy a 5% increase in income next year will be Buckingham Palace. The Sovereign Grant, used to fund a number of official royal duties, pay staff and maintain palaces, will rise by £1.8m next year from £36.1m to £37.9m.