UK: It's Budget Day

[edesignuk]

http://newsimg.bbc.co.uk/media/images/45688000/jpg/_45688100_darlingredbox226cr_getty.jpg

Chancellor Alistair Darling is due to give a Budget statement to match the severity of the economic downturn.

He is expected to unveil soaring public borrowing and details of the worst recession since World War II ended.

Tax rises and spending cuts from 2011 are likely as Mr Darling sets out his plans to restore public finances.

Meanwhile, the International Monetary Fund (IMF) has admitted it made a mistake when it claimed the UK faced a £200bn bill for bailing out the banks.

A Treasury spokesman said the figure had been issued in the IMF's Global Financial Stability Report in error.

"The Budget will make a prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting the public finances," the spokesman said.

Mr Darling will reveal his own estimate of the bail-out cost - reported to be more like £60bn - when he delivers the Budget. BBC (http://news.bbc.co.uk/1/hi/uk_politics/8011321.stm).

What goodies do we all have in store for us?

[arkitect]

What goodies do we all have in store for us?

When's the next election due by?

While they're probably going to push VAT higher than 17.5%, the last thing Gordon wants is to have Alistair damage Labour's re-election prospects even further.

The real crap will hit the fan after the next general election… no matter who wins.
:o

[iBlue]

I have adjusted my pants down at my ankles and I am bracing myself in a bent-over stance.

[edesignuk]

When's the next election due by?
http://en.wikipedia.org/wiki/Next_United_Kingdom_general_election

"Barring exceptional circumstances, it must be held on or before Thursday 3 June 2010."

[Queso]

Income tax will remain the same, but there will be a huge number of stealth taxes. Expect larger duties on alcohol (to make us healthier of course) and petrol (to help the environment), a cut in the current tax breaks for pension contributions (politicians and civil servants excepted as per usual) and a rise in VAT to 19% effective June 2010 (:rolleyes:).

What they won't do is shelve all that expensive Home Office nonsense....

[djellison]

Assume The Position.

[drlunanerd]

BBC (http://news.bbc.co.uk/1/hi/uk_politics/8011321.stm).

What goodies do we all have in store for us?

Hopefully a £2000 car scrappage scheme :D

[costabunny]

more money for students please :D

[edesignuk]

At-a-glance: Budget 2009. (http://news.bbc.co.uk/1/hi/uk_politics/8011882.stm)

[Queso]

So far nothing in there that's going to seriously affect me, but I'll wait and see what changes they've made to dividend and corporation tax rates before saying anything more.

[firestarter]

So basically he's done nothing.

The 50% tax rate is a red-herring; irrelevant to most, irrelevant to the budget (wow, he might get 1bn in, compared to his 175bn defecit).

All his figures look bad, even though he's basing next years growth on a figure the IMF think is unattainable.

The one thing he could have done to ease the defecit - cut public sector expenditure - he hasn't done, 'cos he doesn't want to affect their (slim) chances of getting back in.

Pretty pathetic. Even more pathetic to see the BBC/idiot media running the 50% tax as the main story too.

[Metatron]

Not being from the UK...

So when this change is made, people making over $217,000 (US Dollars) in the UK will pay over 65% of their income to the government from income taxes and vat? Taxes nickel and dime people in America from every type of service (public and private). Would I be safe to assume in reality, "well-to-do" UK residents will pay, in some form of taxation, around 75% of their income in taxes?

[Queso]

50% is only charged on the income above the £150,000 boundary, not on all income if you happen to earn more than that amount. Income tax is on a graduated scale in the UK. I forget the exact boundaries as they change year to year, but it is roughly...

£6000 - tax free
Between £6000 and £40000 - charged at 20%
Between £40000 and £150000 - charged at 40%
Over £150000 - charged at 50%

Therefore if you earn £200000 a year as a salary*, you will pay roughly £75800 in tax, or 37.9% on your income (only £5000 a year more than you would have paid last week). There is also National Insurance contributions to take into account, but that changes depending on what pension arrangements you've made, has an absolute maximum of 11% between £6000 and £40000 and is only charged at 1% on all income above that.

VAT meanwhile is only charged on your purchases, and isn't applied universally on all items. Even if you do earn £200,000 a year, if you only spend £20,000 a year on VAT-rated items you will only pay £2608 in VAT for the year. They don't just take it off your income for no reason.

*The system is further complicated by different rates again being charged on dividend and savings income, which is levied at 10% between £6000 and £40000, then 32% on all income thereafter. So if the person earning £200,000 a year is receiving the majority of their money from dividends rather than salary they will pay even less in taxes overall.

Pretty pathetic. Even more pathetic to see the BBC/idiot media running the 50% tax as the main story too.
To the media editors and journalists it's a big deal, due to so many of them being well above the £150k starting point. So it's a very clever piece of media manipulation from the Treasury to ensure what the big story will be. However, the vast majority of us couldn't care less. 2p a litre on petrol will affect us more.

[firestarter]

Queso - if you earn over £100k, you loose £1 of that personal allowance for every £2 you earn. So that first £6k of 'tax free' earnings effectively moves to 40% (or 50%) tax, and represents another 2 or 3 grand to the government!

You also mentioned the fuel duty. It's worthwhile pointing out that fule tax currently runs at over 65% of the cost of fuel (and of course, you're spending your taxed income on that!).

[Queso]

Queso - if you earn over £100k, you loose £1 of that personal allowance for every £2 you earn. So that first £6k of 'tax free' earnings effectively moves to 40% (or 50%) tax, and represents another 2 or 3 grand to the government!
Thanks. I missed that. However, even adding on another maximum £2400 brings the total well short of the 65%-75% being mentioned by the post above mine. I know that my numbers are far from exact, but then with every budget announcement the British tax system gets further complicated due to exemptions and special conditions rather than getting its long overdue and needed simplification. It would take a very long post to explain it properly (if anyone in the entire country can actually explain it properly anymore). I was just trying to illustrate that the system isn't a straight line percentage as people often misunderstand it as.

(and of course, you're spending your taxed income on that!).
You may be ;)

[MotleyPete]

I have thus far studiously avoided any news on the budget. I didn't even read anything in this thread.

I'm pretending I'm on holiday. It feels good. I might have a pina collada or something.

[iGary]

So you guys pay 40% on a 40,000 salary, and then have to pay 17.5% VAT?

Ouch.

[robbieduncan]

So you guys pay 40% on a 40,000 salary, and then have to pay 17.5% VAT?

Ouch.

No. The bands are stepped. So you pay 40% on your income above that level, not on the entire income.

[firestarter]

So you guys pay 40% on a 40,000 salary, and then have to pay 17.5% VAT?

Ouch.

It's about 30% up to 40k (20% tax + National Insurance), and only hits 40% on the money you earn above 40k, but essentially you're right.

It sucks in a lot of ways, but I have to say that I'm really glad we don't have any health care insurance worries. I'd rather pay a little more tax than deal with all that braindamage.

[iGary]

It's about 30% up to 40k (20% tax + National Insurance), and only hits 40% on the money you earn above 40k, but essentially you're right.

It sucks in a lot of ways, but I have to say that I'm really glad we don't have any health care insurance worries. I'd rather pay a little more tax than deal with all that braindamage.

Well my company pays for half of my health insurance, which is $420 a month total, so that 10% health care tax is about right, all said, I guess.

The VAT is what kills me. Our sales tax averages 5% in most states.

[robbieduncan]

The VAT is what kills me. Our sales tax averages 5% in most states.

Yeah, but all prices here (at least in shops etc) are quoted inclusive of VAT so you don't actually notice how much it is. It always annoys me in the US when the price I see is not the price I pay!

[Queso]

Well my company pays for half of my health insurance, which is $420 a month total, so that 10% health care tax is about right, all said, I guess.
Similarly here in the UK, employers also have to pay 10% of an employees salary to NI within the same lower-and-upper limit boundaries. The NI levy also pays for the majority of state pensions and benefits, so it's not just a healthcare payment.

[iGary]

Similarly here in the UK, employers also have to pay 10% of an employees salary to NI within the same lower-and-upper limit boundaries. The NI levy also pays for the majority of state pensions and benefits, so it's not just a healthcare payment.

Well we also pay 15% to Social Security, half of which gets paid by the employer.

And Medicare (not sure of the percentage).

It'd be interesting to see how it all works out if you distilled all the costs down.

[BoyBach]

We've got high taxes (the Tories won't be lowering them when they assume government next year) and massive spending cuts (even if Labour miraculously cling onto power) to look forward for decades to come.

May I offer my heartfelt congratulations to our MPs - past and present - for a job well done. Deserve every penny of their pay, expenses and pension, bless 'em.

[iBlue]

It'd be interesting to see how it all works out if you distilled all the costs down.

It would. I am sure we pay a fair whack more in the UK but this is a "small" country standing up with the big boys all the frickin time, and that must take some big funding. :rolleyes:

[firestarter]

It'd be interesting to see how it all works out if you distilled all the costs down.

(Puts political hat on)

The Labour party that we currently have has definite socialist leanings. Britain doesn't have a strong culture of tax rebates (like the US) as this emphasises that it's YOUR money that the state is taking less of. Instead they prefer to collect similar taxes from everyone in employment and then provide additional benefits to certain groups - so there are child benefits etc. The emphasis of this is that the state cares/provides money. I disagree with this approach, as I think it encourages state inefficiency and reduces transparency.

What I'm trying to say though is that the UK position can't be seen just as tax and rebates, there's a parallel side of it which include benefits paid to most parents (regardless of their income). It pretty much sucks if you're not in one of the government's chosen special interest groups.

[SydneyDev]

50% tax rate? So much for small government/low taxes/thrift and hard work.

[yg17]

Yeah, but all prices here (at least in shops etc) are quoted inclusive of VAT so you don't actually notice how much it is. It always annoys me in the US when the price I see is not the price I pay!

Yeah, I liked that about the UK. If something is priced at £10, then I pay £10 and nothing more.

I know VAT is a certain percentage, is that percentage the same across the entire country? I wish sales tax was included in prices in the US, but sales tax percentage is different in each municipality, so manufacturers couldn't really give an MSRP since it would be different everywhere. And just imagine the uproar if the advertised price of an iPod is different in different parts of the country. I could just imagine the threads...."An iPod is $326.83 where I live but it's only $323.41 where my friend lives. Apple is ripping me off!"

[robbieduncan]

Yeah, I liked that about the UK. If something is priced at £10, then I pay £10 and nothing more.

I know VAT is a certain percentage, is that percentage the same across the entire country? I wish sales tax was included in prices in the US, but sales tax percentage is different in each municipality, so manufacturers couldn't really give an MSRP since it would be different everywhere. And just imagine the uproar if the advertised price of an iPod is different in different parts of the country. I could just imagine the threads...."An iPod is $326.83 where I live but it's only $323.41 where my friend lives. Apple is ripping me off!"

Yes, VAT is set at a country level so is the same across the whole UK, but it does vary across Europe. So the price could vary across the Euro zone. But I'm not sure if it does...

[firestarter]

Yes, VAT is set at a country level so is the same across the whole UK, but it does vary across Europe. So the price could vary across the Euro zone. But I'm not sure if it does...

Yes, the VAT rate does vary across Europe (http://en.wikipedia.org/wiki/Tax_rates_of_Europe). This is particularly annoying when you buy stuff over the internet, as usually the VAT rate of the country the company operates in is the one charged (so if you buy Capture One - Phase One's great photo-RAW decoder, you get to pay 25% VAT in Denmark!).

The down side of VAT being included in prices is that we're less aware of it, and we question the government less when it's changed/increased. Although the tax situation in the States is annoying, at least citizens are constantly reminded that the state is taking their money...

[robbieduncan]

Yes, the VAT rate does vary across Europe (http://en.wikipedia.org/wiki/Tax_rates_of_Europe). This is particularly annoying when you buy stuff over the internet, as usually the VAT rate of the country the company operates in is the one charged (so if you buy Capture One - Phase One's great photo-RAW decoder, you get to pay 25% VAT in Denmark!).

So the VAT rate changes, but the price paid does not...

[firestarter]

So the VAT rate changes, but the price paid does not...

What do you mean?

Apple (for example) probably maintains a uniform Eurozone price by just operating out of one country.

For corporates operating out of different Eurozone countries, the price paid by the punter SHOULD change to reflect the local VAT.

[robbieduncan]

What do you mean?

Apple (for example) probably maintains a uniform Eurozone price by just operating out of one country.

For corporates operating out of different Eurozone countries, the price paid by the punter SHOULD change to reflect the local VAT.

I was more referring to your example of paying the same price for Capture One regardless of the VAT rate in the country you reside as you pay the VAT in the country of sale, rather than the country of purchase. Clearly this offers simplicity in term of administration and registration, but does not always offer the best deal to the customer.

[yg17]

What do you mean?

Apple (for example) probably maintains a uniform Eurozone price by just operating out of one country.

For corporates operating out of different Eurozone countries, the price paid by the punter SHOULD change to reflect the local VAT.

But if there are physical Apple Stores in two Eurozone countries with different VAT rates, then the prices aren't going to be uniform, right?

[Eraserhead]

But if there are physical Apple Stores in two Eurozone countries with different VAT rates, then the prices aren't going to be uniform, right?

Well they might well just keep the prices the same, and just make less/more profit in each.
50% marginal tax rate on income over £150 000?

FIFY.

So much for small government/low taxes/thrift and hard work.

Unlike the Americans we don't pretend to do this.

[SydneyDev]

Unlike the Americans we don't pretend to do this.

I don't think you should be poking fun at the Americans when you have the GDP figures of lazy people.