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2007 Budget - Smoke & Mirrors?

The 2007 budget day has been and gone and Gordon Brown has now delivered possibly his final Budget speech. With all the smoke and mirrors surrounding it, what will it mean for you?

The headline grabber that Gordon has plumped for this year’s budget announcement was to cut the basic rate of income tax by 2p to 20p from April 2008. Good news you may think!

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However, when the Gord giveth, the Gord taketh away - he’s scrapped the 10p income tax rate for the first £2,150 meaning that you will pay 20% as soon as you earn more than your personal allowance rate of £5,225 (for a single person under 65) – which is bad news for low earners!

To pay for the cut in income tax, other taxes have of course gone up, such as fuel duty, higher road taxes for ‘gas guzzling’ cars, and the usual hikes to our alcohol and cigarettes.

Gordon Brown has announced some changes that will please some savers:

• From April 2008, the annual tax-free savings limit for ISAs has been increased to £7,200, of which £3,600 can be held in cash. Check out our ISA best buys to compare the latest deals.
• The capital gains tax exemption threshold will rise from £8,800 to £9,200. Married couples will also see £18,400 worth of capital gains become exempt from tax. Check out our investment best buys to compare the latest investments.
• The £285,000 inheritance tax threshold will be raised in annual installments and will reach £350,000 by 2010.

Gordon Brown hasn’t been quite so generous for first time buyers though:

• Many first time buyers are struggling get onto the property ladder due to increasing house prices, so the decision by Gordon Brown not to increase the Stamp Duty threshold was met with widespread dismay.
• First time buyers will still have to fork out at least £1,250 to cover this tax, means finding the best mortgage deals is even more important.