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18th March 2004
The Budget 2004 -how will it affect you?
Delivering his eighth Budget, the chancellor froze a range of taxes and claimed the UK was enjoying its longest period of economic growth since the Industrial Revolution. So what does it all mean to you?
Taxes
- The chancellor has announced that tax rates are staying the same, but tax bands will rise in line with price inflation.
- The basic personal allowance for people aged under 65 will be increased in line with inflation to £4,745 for 2004/05.
- Some good news for self-assessment tax payers as shorter tax returns will be introduced for more than 400,000 taxpayers from April.
- Some 20,000 public service jobs will be relocated out of Whitehall.
- Customs and Excise and the Inland Revenue will be merged. Between them, the two departments will shed 10,500 staff by 2008.
- Education Department will cut HQ staff by 31 per cent by 2008. All departments will cut admin budgets by at least 5 per cent by 2008.
What this means:
On the surface, not a lot. However, it has been seen as a stealth
tax. Incomes tend to rise faster than prices, which means more people will
be caught within the higher tax rate.
The extra cash gained from the 40,000 jobs lost to civil servants will be allocated
to schools and pensioners
Family
- New incentives to be piloted to encourage lone parents and others to gain new skills.
- Every teenager is to have the offer of training or education until 18
- Education Department to designate up to 1,000 more specialist schools.
- Typical primary school to get direct payment of over £55,000, and typical secondary of £180,000.
- Every secondary school to be refurbished by 2015.
- Education budget for England will be £64 billion by 2007-08.
- Funds for Sure Start, early education and child care will rise on average annually by 17 per cent.
- There will be 1,700 children's centres by 2008.
What this means:
Money will be ploughed into the education system to hopefully improve
your child's education as he grows. However, at the same time, top-up
fees are being introduced for further education.
Low-income families
There is an increase to Child Tax Credits which equates to up to £3.50 a week (£180 a year) per child.
What this means:
The Treasury announced in the pre-Budget report that as many as 3.7 million
families and 7.2 million children will benefit from the increase.
Housing
For the second year in a row, stamp duty has been frozen. The chancellor has asked the Office of the Deputy Prime Minister to consult on the affordability of housing, opening up a national debate on the issue.
The move follows the publication of a Treasury-sponsored report by economist Kate Barker. It concluded Britain needed up to 140,000 extra new homes a year if housing supply was to keep apace with demand.
What this means:
"Given the speed at which house prices are rising more people will
be dragged into the highest rates. In effect, freezing the rate while
prices are rising is a classic stealth tax," said Anne Redston, tax partner
at Ernst & Young.
'Sin' taxes
- Cigarettes: Up 8p a packet
- Beer: Up 1p a pint
- Wine: Up 4p a bottle
- For the seventh Budget in a row, duty on spirits has been frozen
What this means:
The taxes on cigarettes, beer and wine are all in line with inflation.
Tax on cigarettes is less than was widely expected but it still brings
the average cost of a pack of 20 cigarettes to over £4.50.
Car
- The annual rise in fuel duty delayed for nearly six months.
- The duty rise for low sulphur fuel will be 1.9p per litre. The rise for new and soon to be standard sulphur-free fuel will be 1.4p from Sept 1 in line with inflation.
- Red diesel, fuel oil, and liquid petroleum gas will rise 2.4p a litre.
- from Jan 1 next year, to encourage cleaner fuels, bioethanol will have the same incentives as biodiesel - a 20p per litre reduction in duty compared to petrol and diesel until at least 2007.
- Vehicle excise duty frozen.
What it means:
The Budget will make little difference to the amount you spend on
running your car, although if you drive extensively you are more likely
to feel the extra 1.9p per litre of unleaded petrol. Car tax remains the
same.
Overall
This Budget is cautious and has been claimed as one to try and gain votes for the next election. Both labour and Conservative have agreed that it has 'drawn the line' under the next general Election.
Regardless of this, for now it makes very little difference to you financially, although it is suspected that the spending that has been proposed in this Budget will come back to the public in the form of increased taxes in the future.
Where to next?
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