Q&A: Your budget questions answered
Updated on 22 March 2007
A panel of experts examine what yesterday's budget means for you.
The Chancellor's been accused of giving with one hand, and taking away with the other, and over-inflating his claims of extra help to those who've lost their pension schemes, which the government denies.
So who are the real winners and losers from Gordon Brown's 11th and likely final budget?
Well your e-mails have been flooding in, and we assembled a panel of experts to help answer some of your questions. We were joined by Patrick Stevens from the accountants Ernst and Young, Russell Marsh from the Green Alliance, and the pensions analyst, and former advisor to the Chancellor, Ros Altman.
Case study: Income tax
We've had lot's of e-mails from people wanting to know how the tax changes affect them, so we've picked one family out. This is from Julie and Mark, who say:
- He works full time and earns around £54,000 pa.
- She work part time and earn £13,000 pa.
- We have two children under 16.
- We are not entitled to working tax credit.
- My husband drives a 4X4 and I drive a 2 litre car - both are petrol powered.
Are we better or worse off?
2006-07 - UP £122 None of the big changes start this year, so everyone is a little better off because of the inflation changes to the thresholds. Hence they will be a £122 better off.
2007-2008 - DOWN - £178 But the changes will take place in the following year and so they will be £178 worse off - mainly because he owns the 4x4.
The Chancellor cut the basic rate of income tax by 2p to 20p but also abolished the lower 10p rate of tax. Who wins from this?
If you're affected by both of these rates than it all balances out, one item cancels out the other. The tricky bit is that lower earning people will be hit by the wiping out of the 10 per cent rate and replacing it with the 20 per cent rate.
Whereas people earning larger sums of money will get the full benefit of the basic rate coming down from 22 to 20 per cent.
So if you're a higher earner - receiving anything from £18,000 per year upwards, than everything is going to pretty much balance out.
Below £18,000 you will be worse off from income tax, due to the replacement of the 10p per pound tax with a 20p per pound. But tax credits will bring you back again - if you're entitled to them.
Was this a green budget?
Russell Marsh from the Green Alliance certainly thinks it is, but adds a word of caution.
Compared to previous budgets the chancellor's done a lot more this time round than he has done in the past.
But there are areas where he could have gone a lot further. He only penalised the 'gas guzzlers' by a few hundred pounds. It might change some people's behaviour and entice them to buy smaller cars - but considering these cars cost twenty to thirty thousand pounds an extra couple of hundred is not expected to make a real difference.
Also, the chancellor didn't do much on bio fuels this time around. Encouraging bio fuels would have been the carrot to the car tax stick.
Are pensioners winners from this budget?
For some pensioners it is, like the rest of the budget - some will be better off, some will be worse off.
The reality for pensioners is that the government has put in a hugely complex system, so that virtually no pensioner will be able to work out if they're better off or not.
You may need to be some financial whiz kid to understand how the pension credits work, how it might penalise your private pension and whether you are in the 10 per cent band going up to 20.
Has he simplified things?
The income tax system has become more simple by bringing in the income tax and National Insurance thresholds in line with each other.
The real problem is so much more relies on the tax credit system, it is very complicated and many people do not know how to claim the credit they're entitled to and it doesn't help everyone in the same way the income tax system covers the entire nation
