How the latest Budget has squeezed middle England
and affected Child Benefit.
It has been estimated that there are about 29 million tax payers in the UK and from this group nearly 2 million are earners who generate an income of £50,000 a year or more. This means that 93% of tax payers earn less than £50,000 (source Wikipedia “Income in theUK” article)
We can therefore deduce that only a small percentage will have the opportunity to find true financial freedom. Unfortunately this kind of freedom is nothing but a dream for the majority; indeed nearly 24% of people have an income of less than £10,000 per annum (source Wikipedia “Income in theUK” article)
The Coalition government’s ambition to take people on low incomes out of the tax system took a leap forward in the recent Budget. The Chancellor increased the income level at which people start to pay tax by £1100. This means that another 800,000 will be taken out of the tax system and since coming to power nearly 2 million people are no longer paying tax as a result of the Coalition’s tax policies.
These measures will surely help the most disadvantaged in the country. Those at the other end of the spectrum that is the 7% on income exceeding £50,000 are relatively comfortable.
The media makes much of the so called “squeezed middle”, it is this group that seems to bear a disproportionate burden at times when a Chancellor has to make tough decisions on where to make unpopular cuts.
Removal of Child Benefit
Before the Budget there was much speculation as to how the removal of child benefit would operate. The original intention was to remove it from higher rate tax payers (income exceeding £42,000).
Clearly this would have been unfair to families with a single earner; where if the income exceeded £42,000 by just £1 they would lose the total child benefit; this did not compare well with families with two earners on £42,000 each who would have kept the benefit in full.
The Chancellors answer has been to raise the threshold so that child benefit is only effectively lost when an income reaches £60,000.
Despite this solution the “squeezed middle” is still being pinched.
Financial planning may not bring financial freedom but can “make do” and mend resources that have not received the attention they deserve.
The results are often surprising and invariably put people in an improved financial position.
In austere times everyone has a responsibility to make the most of their finances. If you would like to know more about how to make do and mend your financial recources,
Give your independent financial adviser a call now to find out your child benefit options.