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The Friday Five: why the young are the Budget's real victims
The 'granny tax' may have grabbed the headlines this week, but young people and families are the real casualties of Osborne's 2012 Budget.
by Victoria Bischoff on Mar 23, 2012 at 10:44Follow @VBischoff
The proportion of taxpayers paying the higher rate of tax, meanwhile, will reach 15% next year, having been just 5% in the late-1980s, said Paul Johnson, director of the IFS. ‘It would be useful to know if the chancellor has a view as to what proportion of taxpayers should be paying at the higher rate.’
4. No stamp duty relief for first-time buyers
Aspiring property buyers were also left high and dry on Wednesday.
Land Registry figures put the average UK house price at more than £160,000 – over £350,000 if you’re trying to buy in London. Given that the average salary for full-time employees is a little over £26,000, that’s a pretty hefty price to pay.
What’s more, with most lenders still asking for a 20% deposit, buyers have to pay £32,000 of this up front – as well as forking out for some seriously expensive admin fees.
News that the stamp duty holiday for first-time buyers will not be extended beyond the 24 March deadline, therefore, will come as a serious blow. It means first-time buyers purchasing a property worth up to £250,000 will also need to stump up 1% of the transaction in stamp duty – another £1,600.
So while the government’s NewBuy scheme, aimed at helping 100,000 first-time buyers get an affordable mortgage on a new-build property, is something at least, it nowhere near makes up for cancelling their stamp-duty benefit.
And it’s not as if renting is a cheap alternative…
5. Revised child benefit cuts will still sting
Finally, while Osborne did climb down somewhat and revise his original child benefit cuts, hundreds of thousands of families are still set to suffer.
Originally, Osborne planned to whip child benefit away from any household with a higher-rate taxpayer – someone earning over £42,475. Critics, however, claimed this was unfair on households with just one earner who was a higher-rate taxpayer, as they would lose their child benefit, while a family with two earners just under the higher rate limit would keep it.
To pacify the critics Osborne has now said that only households with someone earning over £60,000 will lose the benefit completely. And to prevent a ‘cliff-edge effect’, which was another primary concern, families with an annual income of between £50,000 and £60,000 will see a gradual reduction in their child benefit – a 1% reduction for every £100 earned over the £50,000 threshold.
However, those who were concerned that the child benefit entitlement will depend on the income of the highest earner in the family will still be worried as this is still the case. And given that the higher rate threshold is going to be reduced next year, more people are going to be affected.
Osborne said that the revisions mean that 90% of all families will remain eligible for child benefit. Of the 1.6 million families losing child benefit under the original plan, however, the IFS estimates that 700,000 people will still lose all of their benefit. Some 400,000 will only lose some, while 500,000 will retain it all.
For a full overview of Osborne's 2012 Budget check out our winners and losers picture gallery.
More about this:
More from us
- Budget 2012: the winners and losers
- 'Newbuy' mortgages launched to help first-time buyers
- Chart of the Day: the inefficiencies behind rail fare rises
- Small rent dip provides little comfort to tenants
- granny tax
What others are saying
- Institute for Fiscal Studies
- The Insitute for Fiscal Studies post Budget debrief
- Youth Contract
- Land Registry
- 2012 Budget
- not enough
- Touchstone Budget blog
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