Economy

EU Referendum

With just a few days to go until the “Brexit” referendum, many people are trying to work out whether they (or the UK as a whole) will be better off remaining in the EU, or leaving it behind. Although a lot of people have opinions on the matter, unfortunately know one knows for sure what would happen if the UK left the EU (or indeed, what would happen if it remained).

For those who are still thinking about it, there is a useful article on the excellent Money Saving Expert website which does a good job of laying out the facts for you to consider: How to vote in the EU referendum

If you know what your vote is going to be, but you’re interested in knowing what the polls are saying about everyone else’s vote, The Economist has a poll tracker which shows you how the opinion polls have changed over time, and also allows you to see how the votes split by demographic such as young / old, male / female.

Whatever you think about Britain’s membership of the EU, this is one of the most important decisions we will make as a nation. It is important that you have your say – which means please make sure you vote on polling day!

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Friday, June 17th, 2016 Economy, Stock Market No Comments

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Budget 2015

The Chancellor gave his pre-election budget earlier today – announcing his plans for forthcoming years. With an election just around the corner, this budget is even more of a sales pitch than usual – most of the changes he announced would only come to pass if the Conservatives were to be in government for the next term.

From a personal taxation point of view, the most significant announcement was arguably the plan for the first £1,000 of interest earned on savings to be tax free, effective April 2016. This will allow almost everyone to pay no taxes on their savings interest (those with high incomes from elsewhere will have this £1,000 limit reduced, possibly to zero), but the amount saved each year for most people is likely to be only a few pounds – and at most £200. There is also a plan to raise the threshold for the higher rate tax (the point at which income tax increases from 20% to 40%) ahead of inflation – an effective tax break for those on good middle-class incomes.

The Salary Calculator has already been updated with the tax rates which take effect from April 2015 so you can see how your pay packet will change next month. You can also compare 2014 and 2015 tax rates side-by-side to see where the differences come in.

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2014 Budget

Later today, the Chancellor will deliver his 2014 Budget to parliament, setting out his plans for the next few years. The Budget is the Chancellor’s opportunity to explain his policies and how they will affect the economy as a whole, and also what differences will be felt by ordinary members of the public.

He is likely to make much of the fact that the tax-free personal allowance (how much you can earn without paying income tax) has increased to £10,000 from April 2014, a coalition pledge delivered 1 year early. There is also talk that he might announce plans to raise the threshold for 40% tax (the amount at which you start paying income tax at 40% rather than 20%) in future years. This would probably lower the tax paid by those in middle management positions, say, and those in more senior roles.

The income tax and National Insurance rates which will take effect from 6th April 2014 have already been applied to The Salary Calculator, so you can easily see how your take home pay will be affected by the new tax year. You can also view a side-by-side comparison of 2013 and 2014 so you can see where the differences come from.

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Trying to live cheaply

I was interested to read an article on the BBC news website today about the new benefits cap, which was trying to estimate how much money someone needs to be able to live (albeit cheaply). As well as some examples of how people can save a bit of money with cheaper options, it was interesting to me to see things that I wouldn’t necessarily have considered when trying to work out my weekly spend.

For example, they say that the average family spends £9.50 a week on furniture. Now, obviously, most people don’t buy a new piece of furniture each week, and I can’t remember the last time I did – but it is expensive and you will need to budget for some such purchases over the year. You might think that if you were living on a budget you just wouldn’t buy furniture, but it does wear out and does need to be replaced, even if it is replaced with a cheaper, second-hand equivalent.

Also clothing – not something I spend money on regularly, but if you have a job interview you will need a suit – and you’ll have to save for many weeks at a couple of pounds a week to afford it. Things like socks will wear out, shirts will get damaged – if every penny counts, it will be difficult to get replacements, even if you shop in budget shops.

Anyway, check out the link above to read the article in more detail. You might spot somewhere that you could economise!

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Friday, April 26th, 2013 Consumer Goods, Economy, Jobs No Comments

What would a 30% flat tax be like?

Earlier this month, the 2020 Tax Commission published a report promoting replacement of our current income tax system, which has varying rates of tax (from 20% to 50%) and National Insurance (typically 12% and 2%), with a simpler system which has a single flat tax at a rate of 30%. They also recommended raising the personal allowance (the amount you can earn tax-free) to £10,000 per year, from its current £8,105.

I thought it would be interesting to see how this plan, if implemented, would affect us when we get paid each month. The following chart compares the April 2012 tax rates in blue with the simplified version in red:

Comparison of a 30% flat tax with current tax rates

Click for a larger, interactive version

As you can see, under this proposal everyone who currently pays tax on employment would take home more money each month, as the total amount due would be less. The 2020 Tax Commission say that as part of this plan, schemes that currently allow people to take income through a business, avoiding National Insurance, would be removed. This might mean that people who are using such schemes to avoid tax at the moment would pay more under the proposal.

But, as you’ve probably realised, if (almost) everyone is paying less tax, that means the Government will get less money. This is indeed true – the gap between the two lines on the chart represents how much less the Government would get each year – and the commission also recommend abolishing inheritance tax and similar taxes, which would further reduce Government income. This would mean further cuts in public spending – which would be difficult to swallow at the moment. More reaction on the report is in this useful BBC article.

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