Budget 2009
May 10, 2009
Alistair Darling delivered his second budget speech last week amid The UK’s worst financial crisis in more than 60 years. As Chancellor of the Exchequer he perhaps has the most unenviable job in The UK at this minute. Rocks and hard places spring to mind.
Mr Darling expects the economy to contract by 1.6% during the first three months of 2009. This has already been called into question by PriceWaterhouseCoopers who stated, only hours after the Chancellor delivered his speech, that the economy had in fact contracted by 1.9% over that period.
The annual budget deficit will rise to £175billion for the next two years and total government debt will double to 79% of GDP by 2013, with the books not balancing until 2018. These estimates are based on Mr Darling’s ambitious growth projections. The reality is that we will be paying higher taxes for many years to come in order to repay the costs of the current financial crisis.
The average man on the street will be unaffected by the 50% tax on income in excess of £150,000 per year, but it is possible that a future government will have to raise the basic rate of income tax in the future. Perhaps in a honeymoon period after the next general election?
For homebuyers the stamp duty holiday for homes below £175,000 has been extended until the end of this year in an attempt to stimulate the declining housing market. This means savings of more than £1,250 for purchases between £125,000 and £175,000 and will help people in our area who are prepared to commit to buy before the end of this year.
Savers will be happy that their Individual Savings Account (ISA) allowance has been increased to £10,200 from 2009/2010 (6th October 2009 for the over 50s). This goes some way to mitigating the reduced income pensioners receive from their savings following interest rate reductions and incentivises all of us to save in a tax-free environment.
All mortgage holders have the ability to consider using savings in stocks and shares ISAs as the repayment method for their mortgage. A typical capital repayment mortgage offers the guarantee that the mortgage will be repaid, but for some people the flexibility of savings in ISAs and potential for your mortgage to be repaid more quickly will be attractive.
If you are unsure what changes to the budget may mean for your circumstances, or if you are considering buying a house, you should consult an Independent Financial Adviser (IFA) who will review your current financial position and recommend the best way forward for your individual circumstances. Advice should always be sought if you are considering using an ISA as the repayment method for your mortgage as there is the risk that your mortgage may not be repaid.
Kieron Bassett Financial Services have two IFAs and we are open six days a week. Contact the office on (01524) 832057 or via e-mail adam@kieronbassett.com to arrange an appointment.
Adam Elkin CertPFS
27th April 2009
