HOW TO SHAFT THE COUNTRY BUT YOU WON'T FEEL A THING...HONEST (The Budget 2003)

Member Name: marandina

Product:	The Budget 2003
Date:	27/02/03 (165 review reads)
Rating:

Advantages: See opinion

Disadvantages: See opinion

Well, it's that time of year again when the clock ticks over from Midnight 5th April taking us into the new tax realm that is April 6th 2003 and beyond.. At the risk of people's eyes glazing over (pleeeeeeease stick me just a little longer), I hope everyone realises that this is one of the biggest influences of wealth that will affect folks second only to your annual pay review (assuming you get one).

OK, start with basics - why have a budget at all (move on if you know this stuff already)? Right, well, basically, the Government needs to balance the books based on planned incoming and outgoings. It's income will be derived from borrowing from other sources (e.g. IMF i.e. International Monetary Fund), taxing businesses and personal taxation. Obviously, the bit we feel the most is personal taxation. This income needs to match any planned expenses for the present and future which are predominantly made up of things like spending on Social Security, Education, Health etc. Maybe a civil servant somewhere sits down once a year and writes out a shopping list on the back of an envelope and hands it to Gordon Brown to ponder his taxation policy for the coming years?

With the tax year rapidly coming to a close what can you expect. Hmmmmm..an overall increase in your tax bill, I'm afraid. This particular government pledged to avoid increasing the basic rate of income tax during it's parliamentary term. Like a smug public schoolboy that's just trapped his willy in a door for fun, New Labour has managed to maintain it's pledge. However, in the true tradition of the Black Arts, a heady mix of smoke and mirrors means that just about every other avenue gets exploited to pick the Public's pockets to support a seemingly over ambitious raft of spending in our name.

So what does that actually mean? For starters, National Insurance contributions are going up. Rather than stick an obvious penny or two on Income Tax, the Chancel

lor has slipped in a 1p increase in the NICS rate for individuals so from 6th April the rate will be 11% as opposed to 10%. Not withstanding that, the upper cap gets scrapped so whereas before you would only pay National Insurance on the first £29000 or so of your income, effectively you pay it on the lot increasing the top rate of tax to 41%. Self-employed folks get an increase to 8% from 7% on their earnings whilst employers face an increase too.

The ephemeral Council tax bill looks like it will get a new, inflated appearance with increases in the region of 13%. Average punters with houses in Band D as assessed in 1988 for properties then worth between £68000 - £88000 face annual bills in the region of £1200. Needless to say, yet again these rises are far and away above the rate of inflation with this particular form of tax on a seemingly unending upward spiral. Personally, I've yet to see any added value from one of my biggest monthly outgoings. In many ways, this increase is the most overtly outrageous as every year this particular demand just soars away and above inflation. Of course, a captive audience can do little about it apart from giving dustbin men the occasional scowl.

Not satisfied with the massive raids on pension funds and the consequent collapse of final salary schemes as a result of the withdrawal of the facility to reclaim tax credits on dividends, the same treatment is about to be applied to the Government vanguard of ISA from April 2004. The withdrawal of this facility on ISA looks like costing investors £27million a year.

In the scheme of things then, what will this mean to you? *If you are on a household income of £100000 then you will be around £1012 worse off. Those with an income of £60000 will be about £560 worse off; If you bring in £40000 then you are £308 worse off and family incomes of £30000 will see a bigger tax bill of £208.

The annoying thing about the budget and it's consequences is
the way it appears to be sludge piled on numerous other layers of sludge. Since 1997, Labour has come up with at least 26 changes to the taxation system with nearly all of them being cloak and dagger rises designed to be innocuous. Termed "stealth taxes", the Government has made a tradition of being underhand about the overall increase in the tax burden for the majority year on year. We have amongst the most expensive petrol in the world whilst even holidays face a surcharge with a doubling of airport taxes on certain types of flights abroad.

There are ways of mitigating these increases other than using Robert Maxwell's former accountant and pensions adviser. There is the new Child Tax credit which has to be claimed via application but will help families on incomes up to £58000pa. Families with an income of between £18000 - £50000 can expect £10.48 per week for the first child. The key here is bothering to claim and in the spirit of redistributing income from the top end to those lower down the fiscal scale, the benefit is worth more to those on lower incomes with a tapering effect built in as your income increases meaning those at the top end will get virtually nothing.

Of course, there are lots of other ways you can attempt to beat the taxman. You'll get a new ISA allowance of £7000 in the new tax year which means all of the interest or increase in fund value for those taking up the stocks and shares option will be sheltered from the Inland Revenue.

If you are lucky enough to get a bonus then receiving it in this tax year means that you will pay NI at the current rate. You could always sacrifice some of your salary and take an increase in pension instead. Contributions to pension funds are free of tax and NI so you will reduce your NI liability whilst increasing your pension pot for later on. It's worth noting that you can only sacrifice future salary increases and not current salary.

Having gone through t
he various ramifications, I can't help feeling a little depressed and a wee bit lonely. Like Jeremy Clarkson lost in France with just a black hooped T-shirt for company, I'm desperately looking for the light at the end of the tunnel. Political affiliations apart, things don't look rosy. With little alternative to a tired, clueless government, the demands on individuals and businesses alike to compensate for Politicians' inadequacies remain prevalent. There is even the evil spectre of the protest vote resulting in the ridiculous elections of far-right entities up in Yorkshire. It says something when normal working-class folks feel the need to vote for the BNP to try and tell the government that its pathetic attempts to solve the asylum issue are playing on everyday people's minds.

I still hope that sooner or later, somebody decides to scrap both the current political system along with our ridiculously over complex methods of imposing tax on people. The whole shebang is so out of date and corrupt. It needs a blank peace of paper and a child of 7 to come up with something we can all understand and respect. Until then, here's to the next budget and the tax increases it will surely bring.

Thanks for reading and comments welcomed

Marandina




*Source - Price Waterhouse Coopers/Sunday Times 23/2/03

More info at http://www.budget.gov.ie/

Summary: