How will the 2009 Budget affect your family?

I don't usually pay much attention to politics and money. Most of the issues go over my head: I'm certainly no financial expert and much of the jargon serves to confuse rather than educate me!

But at this time, Britain is in recession. My husband and I both run our own businesses and have four children to support. So I listened intently to the budget on Wednesday with particular interest for how finances will change for those with families to support.

For those of you who want to know how the 2009 budget will affect your family, here is a jargon-free brief guide with a slant towards families with children:

Taxes and allowances

There will be no tax increases this year. However, those who earn more than £150,000 per year (the lucky few!) will suffer an extra 5% tax increase (bringing this up to 50%) from next April.

Personal allowances will be fully withdrawn for those earning over £100,000 a year from next April too. This must be quite a shock (and a dramatic rise in how much to pay) for those lucky or skilled enough to be earning such big bucks.

Thankfully for those of us at the other end of the scale, there is some relief: personal tax allowance (for those earning less than 100k) will increase from £6035 to £6475 (an increase of £440). Also we can earn £2600 more before being taxed at the 40% rate (up from £34,800 to £37,400).

Families with children will benefit from additional Child Tax Credits and Child Benefit allowances, plus reductions in their tax/National Insurance bills. Take a look at these tables on This is Money to work out exactly how you stand in regard to finances from these budget changes.

Child trust funds will increase by £100 per year for disabled children and £200 per year for severely disabled children, offering savings in excess of £5000 when these children grow to adulthood. Also, grandparents who look after their grandchildren so that the parents cango out to work will be able to claim credits towards the basic statepension.


Cigarettes and Alcohol


Both tobacco and alcohol duties increased by 2% from Wednesday evening. This causes approximate increases of:
  • 7p for a packet of 20 cigarettes
  • 1p for a pint of beer (experts believe this will be rounded up to as much as 6p to the end-consumer due to brewers, pub companies and landlords round up the costs to protect profits)
  • 4p for an average bottle of wine
  • 5p to sparkling wine
  • 13p to a bottle of spirits (eg: whiskey)
Mr. darling believes this will raise 6 billion pounds in taxes by 2012, but that's still a drop in the ocean when compared to the HUGE debts Britain will owe by then!


Motoring

I couldn't help thinking that our recent (slight) decrease in the cost of fuel was too good to be true. From September, fuel will increase by 2p a litre, with further increases of 1p a litre for the next four Aprils thereafter.

This won't just affect families with cars, but the costs of public transport and taxis too.

For those considering buying a new car, the government has introduced a new scheme offering £2000 towards the cost of a more fuel efficient vehicle when scrapping vehicles more than 10 years old (registered before December 1999 - V-reg and older). There are some conditions though: we must have owned the car for more than 12 months (preventing anyone from buying an old banger for the sake of the trade-in value), and this offer expires next March. Read more about the car-scrapping allowance here.


Mortgages and Homes

The Stamp Duty holiday on properties up the value of £175,000 has been extended until the end of the year; this means that around 60% of homebuyers will not be liable for tax on the value of their new homes.

Mr. Darling also announced a further £80m for the Homebuy Direct first-time buyer scheme. This means that if you're a first-time buyer but can't afford to buy a suitable homewithout help, you may be entitled to an ‘equity loan' for up to 30 percent of the cost of a home.

The Homebuy Direct scheme applies to new-built homes, and applicants should be earning under £60,000 per year and will need to cover a minimum of 70 per cent of the cost of a home youare buying through a mortgage from a qualified lender who is regulatedby the Financial Services Authority. More details of this scheme can be found here.

These schemes will offer relief for some families in purchasing new homes, and it's also hoped this will boost the housing market. Even in this recession, it is worth considering all options available for your family to see if you are able to purchase the home you've been considering.


So will families really be better off this year?


I would like to think that Alasdair Darling's Budget this year will mean families (especially those on lower budgets) will be slightly better off. Families whose income is below the £50,000 mark still qualify for help through tax credits, and the housing schemes enable some of us better means for buying our own homes.

However, as stated in The Telegraph: "All forms of tax now absorb about 10pc more of the average family's income than they did when Labour came to power", and many families are still confused about the tax credits system, and whether they are eligable for assistance.

If you're in any doubt about your income, family allowances or any other aspect of how the 2009 budget may affect your family, the best place for assistance is the Direct.gov.uk website. Here you can find helpful information on almost everything, with links and contact details for all public services.

I hope this post has helped you understand the basics of the 2009 budget in relation to families with children. Please feel free to leave your comments and experiences below.

Image credit: austinevan