Written by John Spencer | 25 March 2011

Who were the winners?

Small Businessess

The government has reduced, and will continue to reduce, the rate of Corporation tax for higher profits in a bid to make Britain ‘open for business’. There is a small reduction for lower business profits. This is partly offset by reductions in the rates of Capital Allowances in investment. Overall though, these lower CT rates will be very welcomed by the business community.

First-time buyers

First time buyers are getting a boost of £250m. Under Firstbuy Direct, 10,000 people will be helped onto the housing ladder. This new scheme will help individuals buy new-build properties, which should also give a secondary boost to the construction industry. First-time buyers will need to raise 5% of the deposit, the government will provide 10% and the house-builder will provide 10%.

The government aid, in the form of a loan, will be available to households earning less than £60,000. It is proposed that the loans would be interest free for five years, with borrowers paying 1.75% interest in the following year after and then 1% above inflation thereafter.

Drivers

Very slight good news; the proposed fuel duty rise was scrapped and 1p taken off the price of fuel immediately. This against a 15.6% increase in fuel costs over the last year!

Low and middle-income earners

The personal allowance, the amount that people can earn free of tax, is to rise by £630 to £8,105 – on top of the £1,000 increase now in effect. This should benefit 25 million people and take 250,000 out of income tax altogether.

Investors

Income tax relief for Enterprise Investment Schemes (EISs) will increase from 20% to 30% from April 2011. The Government will also increase the size of a company that can qualify as an EIS and raise the investment limit.

Who were the losers?

Savers

There were few measures to encourage saving.  A small number of ISAs pay returns beating CPI but ISAs are limited to low levels of saving. Most returns on the High Street don’t even beat true inflation (the RPI) so all savers are losing purchasing power.

Pensioners

Although the ‘headline’ giveaway in the budget was the raising of the personal allowance by a further £600 next April, on top of the £1,000 rise to the personal allowance for 2011/12 what hasn’t been shouted about is that pensioners won’t benefit at all from these changes – as they already get a higher personal allowances that have NOT been increased in line. There is some mitigation from changes announced in last year’s budget, shortly coming into effect, that re-links the State Pension to earnings, rather than prices.

Higher earners

Although the 50p rate of tax is flagged up as temporary no-one is saying when it will be removed. Those on salaries of £150,000 plus waiting for this to end might consider that Income Tax itself was a ‘temporary’ measure introduced to pay for the Napoleonic Wars  - in 1799!

Worse than that; those in this tax bracket won't benefit from the raising of personal allowances over the next two years as personal allowances start to be withdrawn once earnings top £100,000 and disappears altogether at £115,000 per annum.

Charity

The ability to donate tax refunds through the tax return is to be abandoned; it was apparently little-used and causing on-line security issues.

.......and all of us together

The government is largely linking what it pays out to the Consumer Price Index (CPI) but what it gets in to the Retail Price Index (RPI). CPI currently stands at 4.4pc, while RPI is at 5.5pc. A more blatant attempt by the government to ‘have their cake and eat it’ is hard to imagine.