There’s been a lot of talk about next week’s Budget recently, but what exactly is the Budget? When does it take place? And what can we expect from it?
What is the Budget?
The Budget is a statement delivered by the Chancellor of the Exchequer to the House of Commons. It outlines the state of the UK economy and the Government’s proposals for change to things such as taxation and benefits.
The Budget follows the mini-Budget, which took place in December last year; or as you might know it, the Autumn Statement.
What is the Autumn Statement?
The Autumn Statement is essentially a progress report since the previous Budget. It tends to include an update of the state of the UK economy and gives an idea of the approach likely to be taken in the main Budget the following spring.
It helps people, like yourself, to prepare for any changes that may affect your personal finances. This includes the ways in which our taxes are calculated.
When and Where Will the Budget Take Place?
Chancellor George Osborne will deliver the Budget statement on Wednesday 20 March at 12.30 pm.
The speech will take place on the floor of the House of Commons and will be the forth Budget Mr Osborne has delivered.
So What Do We Already Know?
The Autumn Statement gave us a reasonably good idea of what to expect when the Chancellor gives his speech next week.
Below are just some of the things we are already aware of:
Currently, people under the age of 65 can earn up to £8,105 a year without having to pay income tax.
This is known as the personal allowance and is something that will increase for the tax year 2013-14, which begins on 6 April (and ends on 5 April 2014).
The increase will take the personal allowance up to £9,440. This means that less people will be subject to income tax.
The current tax thresholds are also expected to change. The 40% tax band will start at £41,451 for the 2013/14 tax year.
This is good news for tax payers as it’s predicted 24m people will end up paying less income tax.
On top of this, another major change to take effect in April is to those with an income of more than £150,000. People who fall into this group are sure to welcome the change as their income tax will be reduced from a 50% tax rate to 45%.
Changes to benefits can also be expected. However, some will rise by just 1% in April. This rise is below the rate of inflation.
An example of this is jobseeker’s allowance which will rise to £71 a week (an increase of 71p).
Maternity, paternity and adoption pay are also set to rise by 1%.
A guarantee for the basic state pension shows a positive change to benefit entitlement though as it is due to rise by 2.5%. This takes it to £110.15 a week.
Child Benefit changes have already come into force. These changes were made back in January and you should have acted accordingly at that time.
The changes mean that high-earners have to pay extra tax on child benefit payments received. It will have affected families where one parent is earning over £50,000 a year.
The current rate of child benefit has been frozen until April 2014. This rate currently stands at £20.30 a week for the first child and an additional £13.40 a week for each child after that.
Currently, there is a more generous tax-free allowance for pensioners earning less than about £24,000 a year.
The current allowance for those aged 65-74 is £10,500 and £10,660 for those over 75.
From April though, the allowances for anybody already 65 will be frozen. For anybody not yet 65, who turns so after 5 April, this generous allowance will be scrapped completely. Instead, they will be subject to the same personal allowance as the under-65s.
A new cash accounting regime will be available to those who are self-employed. The idea behind it’s introduction is to make it easier when it comes to tax-reporting. It will not be compulsory though, it will be something select businesses can elect to use based on their cash flow.
Trying to save is never easy and it’s proved particularly difficult to get a decent return on savings due to the economic climate.
The good news though, for those trying to save, is that the annual limit for Individual Savings Accounts (ISAs) is not set to drop! In fact, from 6 April, the limit is expected to rise by 2.1%, taking it from £11,280 to £11,520.
50% of this can be saved in a cash ISA, while the remaining amount can go into a stocks and shares Isa.
What Else Will be Covered in the Budget?
The Chancellor’s speech will determine how much duty is added to the prices of things, such as cigarettes and petrol.
It will also outline how much money each government department is allowed to spend. This is likely to have an effect on more or less everybody in the UK as it can dictate whether or not a new hospital is built and how much funding schools will receive.
What Happens After the Budget Speech?
After Mr Osborne has delivered his speech, the Leader of the Opposition will have the opportunity to respond. This is currently Ed Miliband.
This is followed by a number of days debate on different parts of the Budget.
On the first day of debate, the Shadow Chancellor gives his response.
This year, the Budget debate will take place on Thursday 21, Friday 22 and Monday 25 March.
Finally, the tax proposals announced in the Budget are made into law by the Finance Bill.
Where can I follow the Budget Speech
We will be regularly ‘tweeting’ to keep you updated with all the latest from the House of Commons. Follow us @1stCA
We will then provide you with an update on the Budget outcome to inform you which proposals were accepted and what changes will be made.
You can also follow general Budget coverage on Twitter with the #budget2013 hashtag.