The Autumn Statement and the over fifties.
Tax free cash
The amount that can be earned by those under 65 before tax is due will rise by more than expected. This year the allowance is £8105. The chancellor had already announced that it would would rise to £9205 from April 2013. But in the autumn statement he said it would go up to £9440. The tax free allowance is well on track to rise to £10,000 - as promised by the Coalition - from April 2015. It could happen from April 2014.
The allowances for those currently aged 65 or more will not increase. They will stay at £10,500 for those born between 6 April 1938 and 5 April 1948 and £10,660 for people born before 6 April 1938. As announced in the Budget those allowances will not increase in future years. People born 6 April 1948 or later will not get a higher tax allowance when they reach 65.
But another
400,000 people will have to pay higher rate tax in 2013/14 as the level at which
the 40% tax starts will fall from
£42,475
this year to
£41,450
next.
The threshold for Inheritance Tax will remain fixed at £325,000 until 2015. But from 6 April 2015 it will rise to £329,00.
The Chancellor scrapped the 3p a litre rise in duty on petrol and diesel planned for 1 January. The rise had already been postponed twice and now it will not happen. A rise in duty in April 2013 in line with inflation - probably by less than 1.5p - has been postponed until September.
High earners will see a further restriction in the amount of money they can put into a pension. At the moment they can salt away up to £50,000 a year and get tax relief at their highest rate, worth £25,000 to some. But from April 2014 that will be reduced to £40,000 and the maximum tax subsidy will fall to £18,000.
Pensions and benefits
The state pension will rise by slightly more than inflation from April. The basic single pension will go up by £2.70 to £110.15 a week and the pension for a married woman on her husband's contributions is expected to rise by £1.60 to £66 a week. The 2.5% increase fulfils the Coalition promise of a 'triple lock' guarantee to raise the state pension by earnings, prices, or 2.5% whichever is the highest. This year both earnings and prices rose by less than 2.5% so that figure is used.
However, the extras paid with the pension - SERPS, state second pension, and graduated pension - will just rise by 2.2 % in line with prices. There will also be lower increases for those on pension credit - details are awaited.
Younger people
will get a benefit rise from April which is less than half the rate of
inflation. Instead of rising by 2.2%, most benefits paid to people of working
age will increase by just 1%. That will mean a pound or so a week less than they
would have got under the normal rules and they will be able to buy less with
their benefits than they could a year before.
The squeeze will affect jobseekers allowance, employment and support allowance, income support, maternity and sickness benefits and housing benefit. Extra amounts paid with those benefits for people with disabilities will rise with inflation. Child benefit, which is frozen until 2014, will only rise by 1% a year after that.
Benefits specifically for disabled people such as attendance allowance and disability living allowance as well as carer's allowance will rise with inflation.
Drawdown relief
People with a
pension fund who draw money from it rather than converting it into an annuity
will now be able to take more from it. Last April the amount they could take out
was cut. But the Chancellor has now decided to reverse that increasing the
amount they can take by 20%. It is not clear yet when the new level will apply.
Paul Lewis
6 December 2012
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