Most commentators have considered this to be a neutral budget, even though a lot of emphasis has been given to promoting business and growth.
Britain is still faced with a mountain of debt and the main focus of this budget and possibly foreseeable budgets will be on how to cut costs and to save money in order to reduce the deficit.
This will become the responsibility of future taxpayers who include today’s students. On the back of the recent changes in education fees, students may quite rightly feel on the sharp edge of this financial crisis, as they will not enjoy the same tax breaks many incumbent politicians enjoyed when they graduated.
So what did the budget mean for students and recent graduates.
From April 2011 personal tax free allowances are up £1,000 to £7,475. This will increase to £8,105 from April 2012.
STS Comment: We welcome the increase in allowances, since it will mean less students will now fall into the tax bracket. However with inflation pushing on 5%, the latest increase is not as generous as it first appeared.
The threshold of the basic rate tax band of 20% will decrease by £2,400 to £35,000. This will reduce again from April 2012 to £34,370.
STS Comment: This is the trade off for the increase in the tax free personal allowance. The government does not want to give away any more money so the people at the higher end of the tax scale will pay for the increase. For students this seems fair since a majority are unlikely to earn over the threshold.
The new rate of tax of 50% announced in Labour’s last budget remains, but the Chancellor did indicate it will be temporary since he feels it will do more damage to the country in the longer term.
STS Comment: This is unlikely to affect many students since it only applies once a taxpayer’s income exceeds £150,000 per year.
Commenting on the Budget, Unies Mirza, technical partner of Student Tax Services stated “This budget was aimed at business and enterprise as that’s where the Chancellor sees our way back from the financial crisis. More could have been done to help current students especially in light of the “fees fiasco” and it is a shame George Osborn missed to opportunity to do so.
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The other announcements in brief are as follows;
As expected, the Office for Budget Responsibility downgraded its growth forecast for this year and next, from 2.1% and 2.6%, to 1.7% and 2.5% and forecast that inflation will come back towards its target of 2% over the next 18 months.
The Government has announced that it will consult on the options, stages and timing of reforms to integrate the operation of income tax and National Insurance contributions.
The National Minimum Wage remains at £5.93 per hour for those over 21; £4.92 for those aged between 18 to 21; and £3.64 for those aged 16 and 17.
The Capital Gains Tax annual exemption increases to £10,600 from April 2011 and the rate remains flat rate at 18% until the upper income tax threshold is reached, then it increases to 28%.
The Inheritance Tax nil rate band will remain at £325,000. Students should discuss these aspects with their parents to ensure their inheritance is protected. Parents should be aware that an estate can attract 40% tax if a Will has not been appropriately drafted.
For the housing market there will be some aid for first time buyers, but only for the first 10,000 with a £250 million programme, FirstBuy, which will offer a shared equity scheme.
In terms of education, the Chancellor seeks to return to a world where many more young people are taught a practical skill. The emphasis will be on technical colleges – through the University Technical Colleges programme - and apprenticeships.
There is no change in the VAT rate which remains at 20%.
Petrol prices will increase by 1 pence per litre from 23 March 2011.
Finally, a pint of beer will cost 4p more, 15p will go on a bottle of wine and spirits will cost another 54p.
Any students requiring help or assistance with their tax affairs should register on studenttaxservices.org.uk for free and impartial advice on student tax matters
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