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After the Budget, what's the damage?

Sarah Coles
Jun 23rd 2010 at 4:00AM

Filed under: Taxes, Budgeting & Planning, Emergency Budget

Every Budget starts with some bonkers statistics about borrowing billions and paying trillions in interest on government debt. The figures get so huge that they start to lose their meaning. Likewise when the Chancellor gets to the detail of tax rises and spending cuts it's easy to get the overall picture - shopping will cost more, families will get less support, housing benefit is going to be reformed - but hard to know exactly what this means for our pockets.

However, on day two, the details emerge from the depths of the HMRC, and it becomes clear just what the new measures will cost us.


There's actually some very good news on income tax and national insurance: anyone earning less than £50,000 will be at least marginally better off than they are right now, and anyone earning less than £150,000 will be better off than they would have been if Labour's promises had come to fruition.

Those on £20,000 will be £235 better off in the next tax year, and those on £30,000 will be £135 better off.

The details are:

Those earning £10,000 currently pay £1,175 in tax. They will pay £840 after next April, and £760 the following tax year.
Those earning £20,000 currently pay £4,275 in tax. They will pay £4,040 after next April, and £3,960 the following tax year
Those earning £30,000 currently pay £7,375 in tax. They will pay £7,240 after next April, and £7,160 the following year
Those earning £40,000 currently pay £10,475 in tax. They will pay £10,440 after next April, and £10,360 the following year
Those earning £50,000 currently pay £14,190 in tax. They will pay £14,405 after next April and £14,315 the following year
Those earning £75,000 currently pay £24,440 in tax. They will pay £24,905 after next April and £24,815 the following year
Those earning £100,000 currently pay £34,690 in tax. They will pay £35,405 after next April and £35,315 the following year
Those earning £150,000 currently pay £57,780 in tax. They will pay £59,395 after next April and £59,410 the following year

The bad news comes when you start to look at VAT.

To work out how much it's going to cost you, you have to know roughly how much you spend on VAT-rated goods. However, as a rough rule of thumb:

If you spend £13,400 a year it'll cost you £100 more a year
If you spend £16,600 a year it'll cost you £200 more a year
If you spend £23,100 a year it'll cost you £300 more a year
If you spend £31,600 a year it'll cost you just over £400 more
If you spend £38,100 a year it'll cost you just over £500 more
If you spend £49,500 it'll cost you around £850 more

The average hit is expected to be just over £300 a year.

On balance, therefore, if you make £20,000 and spend £16,600 a year on VAT-rated goods, you'll be £35 a year better off.
If you make £30 and spend £23,100 a year, you'll be £165 worse off.

Clearly the politicians have done a decent job of preparing us for the worst, because on first glance you can't help but be struck by the fact it could be worse.

Emergency Budget 2010

Read about how the speech unfolded and VOTE on how tough it actually was here.

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