This briefing provides details of the measures announced in the Budget on 20th March 2013. While there were no major changes to welfare benefits announced, some of the changes will have an impact on those receiving benefits or tax credits or those in low paid work. For information on upcoming changes to the benefit system, see www.entitledto.co.uk/benefits-changes-in-2013.
Income Tax: Personal Allowance to increase to £10,000 from April 2014
The main income tax allowance (for those born after 5 April 1948) will be increased to £10,000, an increase of £560 worth £112 a year to a basic rate taxpayer with an income greater than £10,000. Taking into account inflation, the increase is worth around £50 per year for each taxpayer. The measure takes a quarter of a million people out of income tax, though they will still have to pay National Insurance on any earnings over £7,750.
The higher allowances for those born before 6 April 1948 will not be increased, and in the long term they will be removed when the personal allowance for those born after 5 April 1948 catches up.
New flat-rate state pension will start in April 2016
The new pension, worth £144 each week, was due to be introduced in 2017, but will now begin from April 2016. This means that the State Second Pension (previously known as the State Earnings Related Pension) will close a year earlier than anticipated. A knock-on effect is that people who are ‘contracted –out’ of the State Second Pension will pay slightly higher employee National Insurance contributions. At present they benefit from a ‘rebate’ of 1.4% of their NI contributions but this will end in April 2016.
Cap on the amount paid by elderly on social care will start in April 2016
This cap was also due to be introduced in 2017, but will now start a year early. It sets a maximum limit on the amount that the elderly can be asked to pay for social care in England at £72,000 (not the previously announced £75,000). The limit on savings and capital that you can have and still be eligible for means-tested help to pay for social care will be increased from £23,000 to £118,000.
New Tax-Free Childcare scheme to start in 2015
A new scheme means eligible families can get 20% of their yearly childcare costs of up to £6,000 per child, paid for by the Government. This could mean payments of up to £1,200 per child, per year. This will replace the existing childcare vouchers scheme that is offered by some employers.
It is available to working single parents or couples who both work if they earn less than £150,000 a year (for a couple, they can each earn up to £150,000). At first it will only apply to children under the age of 5, but this will gradually increase to include children under 12.
Self-employed people are included in the scheme but anyone getting Tax Credits or Universal Credit is not. Instead the government have said that support with childcare through Universal Credit will be increased from the currently anticipated level of 70% of costs to 85% of costs.