Pensioners get fleeced again with 'granny tax II'

PensionerIt's common practice for details of the annual Budget to be leaked to the media in the month before but we've already been given a firm steer about what's going to happen next March.Just a month after the 2012 Budget the government has said what it will be targeting and it won't be pretty. After making a big song and dance about increasing the basic state pension, which has risen to £107.45 from £102.15 per week – the biggest ever one-off increase to the state pension – the government is planning to reduce it by changing the way the income is taxed.

All pension income is taxable, including the state pension (although many people assume it is not). If your pension income exceeds the personal allowance, which at the moment varies depending on your age but will be £10,000 for everyone from 2014/15, then you pay income tax. If a person relies solely on the state pension they usually don't pay any tax.

At the moment pensioners receive the state pension without any tax deducted because thousands of people don't qualify to pay income tax, those that do have a tax bill have to pay it through their tax return. But the government plans to change this and pay out the state pension with tax already deducted, meaning people will receive just £85.96 per week.

This will affect thousands of pensioners. The Treasury has said it won't affect the amount of money that people receive in the long-term but could create short-term 'cash flow issues'.
The government's argument is that for those who have to file tax returns to pay their tax it's very confusing. But the question is: won't it be just as confusing for the thousands of pensioners who have to claim the tax back because their income doesn't exceed the personal allowance and they aren't liable for tax?

The Treasury is investigating the options at the moment and will report back to the chancellor in time for next year's Budget, but the potential change is already being seen as another tax, and been dubbed 'granny tax II', following last month's original granny tax.

Hitting pensions again after the granny tax debacle wasn't a good idea politically but it's even worse for elderly people who are already being hit by rising costs, low interest rates on savings and a freeze on their personal allowance.

Increasing the state pension last month was the right thing to do to try and ease the burdens pensioners are facing, taking that back through a complex tax move is a big mistake.

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Pensioners get fleeced again with 'granny tax II'

As of April 2013, the 50p rate will be reduced to 45p following a study which Osborne claims revealed it would make little or no difference to the amount of tax raised but would significantly reduce the damage to the economy. 

The much-debated cut to child benefit was confirmed, albeit through a less direct hit than was outlined in the pre-Budget report. The benefit will be removed gradually for those earning more than £50,000 – reducing by 1% for every £100 earned over the threshold, cutting off completely at the £60,00 mark. The Chancellor had planned to axe it where one parent earned over £43,000.

Financial service providers always refer to 'typical APR' in advertising to attract customers with favourable rates of interest.

Yet the typical APR on loans and credit cards is only available for those applicants who have a squeaky clean credit record, everyone else could end up with a much higher rate. For example, under EU rules, credit card providers only have to provide the typical APR advertised to 51% of applicants.

So always consider this when applying for accounts and products, and if approved – look out the actual APR that you will be charged.

A potential winner - Osborne particularly name-checked the South East in his Budget which many assume is a veiled reference to a Heathrow expansion.

The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.

M 25-29, 32, 34-35, 38, 43, 45-46

A new stamp duty rate of 7% (up from 5%) will be introduced on properties worth over £2 million - widely considered a sop to the Lib Dems calling for a mansion tax. 

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Alcohol is on safe ground - for the moment. Duty will remain the same but do expect an announcement on alcohol pricing.

Duty will rise on all tobacco products by 5% above inflation, which will add 37p to a packet of cigarettes.

The Chancellor naming Wallace and Gromit caused quite a commotion on the Tory backbench and was possibly the most lively moment in the Chancellor's speech. The Chancellor is intent on keeping UK TV and film productions in Britain and will ramp up support to stop the exodus of British production companies abroad.


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