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Budget 2013: what it means for you
It's over for another year; George Osborne has delivered the 2013 Budget speech, his fourth as Chancellor.
Let's take a look at what has been announced and when it's happening.
Income Tax
A key feature of the Coalition agreement was that the personal tax allowance – the amount you earn each year before paying Income Tax – would rise to £10,000 by the end of the parliament.
The personal allowance currently stands at £8,105 for those under 65, and will rise to £9,440 for the 2013/14 tax year.
And from 2014/15, it will rise to the £10,000 target, a year earlier than the Government pledged.
Pensions
Osborne didn't even wait until the Budget itself to announce that he was bringing forward significant changes to the State Pension and care system. In his speech, he confirmed that the £144-a-week flat-rate State Pension would be brought forward to 2016, as would a lower cap on social care costs, down from £75,000 to £72,000.
Jobs
The Office for Budget Responsibility predicts there will be 600,000 more jobs in 2013 compared to same point last year. That means 60,000 fewer people will be claiming unemployment benefit.
[Related link: Why the Budget won't work]
Inflation
There will be a review of the Bank of England’s remit when it comes to managing inflation. Inflation is important as it not only tracks the growth in the cost of living – things like pensions, benefits and even some savings accounts are linked to it.
However, we’ve regularly failed to hit the 2% target over the last couple of years. There had been talk that the Monetary Policy Committee, which sets bank base rate and is tasked with managing inflation, may be given a new target.
While that hasn’t happened, it has been given permission to use “unconventional monetary instruments to support the economy while keeping inflation stable”. Only time will tell exactly what that means, but it’s an admission that up to now tactics like quantitative easing have not really done the job.
Funding for Lending
The Government launched the Funding for Lending Scheme (FLS) last year, which allows banks and building societies to borrow very cheaply, so long as they then lend that cash out. This has been great news for mortgage borrowers as it’s led to big falls in the average mortgage rates charged, particularly on fixed rate mortgages.
However, it’s been a disaster for savers as lenders no longer need to rely on attracting savers’ cash to fund that lending. That’s part of the reason savings rates are so terrible at the moment.
The Chancellor confirmed he is in discussions with the Bank of England about extending the scheme. Great news if you’re looking to buy a house or remortgage. But not good news if you’re saving your cash.
People wanting to buy a home
The good news doesn’t end there for homebuyers. There’s also the launch of Help to Buy, yet another Government housing scheme. It will see equity loans of up to 20% of the value of a new-build property offered to buyers of all kinds, not just first-time buyers. All you’ll need to take advantage is a 5% deposit.
There will also be a ‘mortgage guarantee’ to help buyers with small deposits. We’ll have more on this as the details emerge.
[Related link: Compare the latest mortgage rates]
Drivers
A fuel duty rise of 3p was due to be introduced in September. This has now been scrapped.
Drinkers
A 3p increase in beer duty was also due to come in. This too has been scrapped. In fact, it’s now been cut by 1p as of Sunday! What’s more the beer duty escalator has been ditched altogether. All other alcohol duties will continue to rise in line with inflation + 2%, so the cost of a pint of cider will rise by 2p, a bottle of wine by 10p and a bottle of spirits by up to 40p.
