BUDGET 2009: What's in store over the next two years (petrol prices are going up again...)


It is easy to get confused over when Budget changes will bite. To help you plan for the next two years, Financial Mail clarifies when the new taxes will apply and how they fit in with changes previously announced. 

Already in effect

Duty on cigarettes increased by 7p for a pack of 20. Duty on alcohol up two per cent, adding 1p to a pint of beer and 4p to most bottles of wine. 

Special new rules rushed out to stop those earning £150,000 or more paying extra into their pensions ahead of a change in pension tax relief in 2011. For them, regular monthly or quarterly pension contributions will be unaffected, but irregular and one-off payments worth more than £20,000 a year could be taxed at 20 per cent. 

Already in effect: Tax on beer, cigarettes and wine has gone up

Already in effect: Tax on beer, cigarettes and wine has gone up

September 1, 2009

Tax on petrol, diesel and liquefied petroleum gas (LPG) up by 2p a litre.

October 6, 2009

Annual Isa allowance for those aged 50 or over increased from £7,200 to £10,200. Up to £5,100 can be saved in cash. (All savers benefit from higher limits from April 2010.)

November 1, 2009

Pensioners' savings of up to £10,000 disregarded when they are assessed for pension credit and council tax benefits. Current limit is £6,000. 

Winter fuel payments for pensioner households kept at the enhanced rate of £250 for those 60 or over and £400 for those aged 80 or over.

Tax on long-haul flights begins to rise dramatically as Air Passenger Duty is reformed. Current rate of tax of £10 for flights within Europe and £40 for those flying outside

Europe replaced with four bands taxed at £11, £45, £50 and £55 relating to distance travelled. These fees are doubled for travelling in anything above economy class. 

January 1, 2010

Standard rate of Value Added Tax returns to 17.5 per cent, having been 15 per cent for more than a year.

Stamp duty holiday on properties worth less than £175,000 ends. Stamp duty of one per cent will now apply on all transactions worth £125,000 to £250,000 (except in designated disadvantaged areas).

The stamp duty for more expensive properties remains at three per cent for property sales of £250,001 to £500,000 and four per cent for property sales of £500,001 or more. 

The Government will guarantee job or paid training to anyone aged 25 or under who has been unemployed for 12 months or longer.

April 6, 2010

New income tax rules apply for those with incomes of £100,000 a year or more.
Other changes include new money for disabled children.

Children who qualify for Disability Living Allowance and were born after September 1, 2002, will have at least £100 per year paid into their Child Trust Fund by the State. The most severely disabled get £200 a year.

The Child Tax Credit rises by up to £20 per child per year on top of inflation. Fuel duty on petrol, diesel and LPG rises by a further 1p per litre plus inflation.

A special first-year rate of car tax will be introduced on all new vehicles. Low pollution vehicles in bands A-D will pay no tax in the first year, but some taxes are doubled.

Those cars with CO2 emissions of more than 255g per km will pay £950 a year.

New powers will allow the publication of the names of individuals and companies caught cheating on tax.

November 1, 2010

The rates for Air Passenger Duty rise again with taxes of £12, £60, £75 and £85 again relating to distance travelled. Because these fees are doubled for anyone travelling in premium class, the maximum is £170 per person for a long-distance flight. 

April 6, 2011

Further significant changes to income tax and National Insurance kick in. The basic-rate tax allowance will be frozen so that any increase in average earnings will mean that more workers will be dragged into the 40 per cent tax band.

The rate of National Insurance increases by half a percentage point for both employers and employees. Employees will pay 11.5 per cent NI on income between the primary threshold, likely to be about £6,500, and the upper earnings limit, likely to be about £45,000 by this stage, and then 1.5 per cent on everything above this.

Employers will pay 13.3 per cent on all earnings above about £110 a week.
The tax relief on pension contributions for those with incomes of £150,000 will be gradually reduced from 40 per cent at £150,000 to 20 per cent where an income tops £180,000.

Currently, payments into a pension of up to £245,000 per year earn tax relief at the taxpayer's highest rate, with the non-basic rate relief claimed back through self-assessment.

The Government argues that it is unfair for about one quarter of all tax relief to go to the very highest earners. It claims that capping the tax relief could save more than £3billion a year by 2012/13.

The exact detail of the new plans has yet to be finalised, but one proposal could result in big earners in final salary schemes taxed at 20 per cent on the contributions employers pay into their pensions.