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WHAT DOES THE CHANCELLOR’S BUDGET MEAN FOR YOU?

KATE SOLWAY, 30
FUNDS CONTROLLER AT PRIVATE EQUITY FIRM COGNETAS
Kate is single and lives in rented accommodation with flatmates. She also owns two investment properties – one a London flat with a mortgage which she rents out, and the other a holiday home under construction in Cape Verde, which she owns outright and will rent out when it is completed. She earns between £100,000 and £150,000 and also works on the side as treasurer for Downright Excellent, a charity for children with Down’s Syndrome. She does not smoke and drinks in moderation.

PRICEWATERHOUSECOOPERS’ BUDGET TEAM SAYS:
Kate will be affected by the changes to personal tax allowances introduced in the Budget.
She will lose her personal allowance on a sliding scale if her earnings are between £100,000 and £112,950.

As an alternative scenario, if her earnings exceed £112,950 then she will lose her personal allowance completely.

However, as long as her income remains below £150,000 there is some good news for Kate, as she will avoid being affected by the new 50 per cent rate of income tax to be introduced from 6 April and the restriction on pension funding.

However, Kate should be mindful of the additional income generated by her rental properties, particularly when she begins to receive rental income from the unfinished Cape Verde investment property, as this may well push her into the highest income tax bracket.

Kate will also be affected by the two per cent rise in duty on alcohol, though this should not be significant as she only drinks in moderation.

ADAM HART, 46
CHAIRMAN OF LONDON BRIDGE CAPITAL
Adam is married with three children aged 10, 12 and 14. He has just founded a new corporate finance advisory firm specialising in the environmental economy, and is therefore interested in green initiatives from both a personal and professional perspective. The business is a start-up but he hopes to take home over £150,000 a year in salary and bonus. In addition to his main residence, he has a flat in London and a home in Canada, though the mortgages are paid off. He has a self-invested personal pension plan (SIPP). He does not smoke but does drink a light to moderate amount socially.

PWC SAYS: Professionally Adam will be interested in the introduction of a £2bn investment bank to back low-carbon industries. This will also be the case with the doubling of the annual investment allowance to £100,000 and the doubling of the entrepreneurs’ lifetime limit to £2m.

Given his level of earnings, from 6 April 2010 he will lose his personal allowance and will also be charged tax at 50 per cent on all income over £150,000. Regarding his SIPP funding, as his earnings are over £150,000, he is already subject to anti-forestalling measures introduced from 22 April 2009. These restrict Adam from changing his pension contributions lest he attract higher-rate relief to a gross contribution of £20,000 per tax year. This, in some cases, is extended to £30,000 depending on his previous level of one-off contributions. Having three children, Adam will benefit from the 70p per week increase in the child benefit he receives.

BILLY COCKERTON, 23
TAX ADVISER AT AN ACCOUNTANCY FIRM
Bill is a tax adviser earning between £30,000 and £40,000 a year. He is single with no dependents, is a non-smoker and drinks socially. He has no car but is a keen cyclist, having recently taken advantage of tax breaks for those cycling to work to buy a new bike. He lives in rented accommodation.

PWC SAYS:
Billy is young and earning a salary of between £30,000 and £40,000, so he is not yet bringing home the amounts that would fall under the introduction of personal allowance cuts or the increased top band of income tax for higher earners, so he need not worry about that yet.

As he is currently living in rented accommodation, he may well benefit from the new measures introduced by the chancellor for the scrapping of stamp duty for first time buyers on purchase prices up to a level of £250,000, though he does not mention wishing to get on the housing ladder at this stage in his career.

He will also be affected by the two per cent rise in alcohol duty as he drinks moderately.

However, he will not be affected by the increases in duty on tobacco or fuel, as he does not smoke and does not own his own car.

LAURA MUCHA, 27
ASSOCIATE AT LAW FIRM NORTON ROSE
Laura is currently saving for a deposit to buy property in central London close enough to walk to work. She makes £63,500 a year as a first year qualified solicitor in the firm's disputes practice and contributes to the firm's pension scheme. She is still paying off her student loan, which she expects to clear in four years time. She is not married and has no children. A non-smoker, she reserves drinking to the weekend and the odd work function.

PWC SAYS:
Laura’s earnings do not cross the new higher tax bracket threshold of £150,000, so she will not be hit by the income tax changes introduced in the Budget.

She will have been pleased to note the chancellor’s announcement about the scrapping of stamp duty for first time buyers on home purchase prices up to £250,000, since she mentions that she is currently renting and saving for a deposit to buy property.

Laura will also be affected by the two per cent rise in alcohol duty, though not to a great extent as she only drinks occasionally and at the weekend.

However, Laura may be affected adversely by Alistair Darling’s decision to impose a higher-than-average tax on cider, since she is part of a demographic group that has increasingly turned to cider as a popular and fashionable drink of choice in recent years.

Duty on cider was cut by two per cent by then-chancellor Gordon Brown in 2002, but Darling yesterday said tax on the drink would increase by 10 per cent above inflation from midnight on Sunday.

RICHARD DIFFENTHAL, 29
ASSOCIATE AT LAW FIRM LOVELLS
Richard is a corporate solicitor. He has a six month old son and rents a property with his wife. They hope to get on to the property ladder soon. They have a car but Richard uses public transport to travel to and from work and plans to cut his travel significantly in a bid to offset his carbon footprint. He takes home between £50,000 and £100,000 a year and contributes to the firm's pension scheme. Other than a few credit card debts, Richard lives debt free as he has already paid off his student loan. He does not smoke and drinks moderately.

PWC SAYS:
Richard will be pleased to benefit from the 30p per week increase in child benefit from 6 April 2010, because he and his wife have just had their first baby.

His finances may also receive a boost because of the scrapping of stamp duty for first time buyers on purchase prices up to £250,000, since he is looking to purchase a first house for his family in the near future.

However, he may be adversely affected in the coming year if his earnings creep over £100,000 from their current level of between £50,000 and £100,000 a year. If that is the case, he will begin to lose his personal allowance. If his earnings rise even further and begin to exceed £112,950, then he will lose his personal allowance completely.

And, of course, if his earnings jump significantly to over £150,000, he will be affected by the new increase in the top rate of income tax which was first announced by the chancellor in the pre-Budget report.

Richard will also be affected by the two per cent rise in alcohol duty as he drinks moderately.

JONNY SAYLE, 25
FOUNDER OF SPIRELIFE, A FITNESS CONCIERGE FIRM FOR CITY WORKERS
Jonny set up his firm, which provides personal training, physio and massage services to clients in their own homes and offices, in December. He is targeting a turnover of around £75,000 for the current year and is hoping to take home a salary of between £30,000 and £40,000. He originally set up the business using his savings but will be looking at further funding options later in the year, with a view to establishing a high street presence. He does not currently have a pension plan or a mortgage, but is hoping to buy his first house relatively soon. He does not smoke, drinks moderately, and has a car but prefers to cycle when possible.

PWC SAYS:
Jonny’s business could well be affected by the increase in tax rates for his target customer group of wealthy City professionals, but he will be encouraged by the doubling of the annual investment allowance to £100,000 and the doubling of the entrepreneurs’ relief lifetime limit to £2m.

Given his desire to look at funding options to establish a high street presence, he will be heartened by the announcement that RBS and Lloyds Banking Group will extend their lending activities to provide £94bn in small business loans.

He is looking to purchase his first house in the near future and therefore will benefit from the scrapping of stamp duty for first time buyers on purchase prices up to £250,000.

Adam will be affected by the two per cent rise in alcohol duty and the 3p fuel duty to be phased in between April and January 2011.