VAT rise: Chancellor George Osborne
Middle class families were last night warned to brace themselves for one of the toughest years in recent memory which will see their incomes fall by thousands of pounds.
Cash-strapped couples will be bombarded with a barrage of financial blows, from the VAT increase to rising mortgage rates, higher National Insurance to frozen child benefit.
It is expected to add up to the biggest squeeze on families since 1982, the year of the Falklands War, because of the toxic combination of the rises and inflation, according to research by the accountants Deloitte.
To make matters worse, many of the tax changes – such as Tuesday’s VAT rise – are not temporary, but will continue to hurt for years to come.
The VAT rise will cost an average of £520 per household, with the increase adding around 3p on a litre of petrol, 6p on a pint of lager, £10 on a man’s suit and more than £300 on a new car.
The list of pain includes:
- The number of higher-rate taxpayers is expected to jump by around 700,000 as the salary at which the 40 per cent band begins drops to £42,475.
- VAT rises from 17.5 per cent to 20 per cent on Tuesday, a £12.1billion tax grab, equal to an extra £33million a day for the Government coming out of shoppers’ wallets.
- The rate of National Insurance – a tax in all but name – will increase by 0.5 percentage points from April.
- Paltry pay rises for most workers which will be far below inflation, and the majority of public sector workers who earn £21,000 or more beginning a two-year pay freeze.
- Loan rates set to jump, adding an extra £60 a month, or £730 a year, on to the average mortgage repayment.
- Child benefit frozen at £20.30 for the eldest child, and £13.40 for each subsequent child, for the next three years – before being axed for higher-rate taxpayers in 2013.
- Another year of dire savings rates, with the average saver currently getting less than 1 per cent on the average instant access account.
- House prices predicted to slump by up to 10 per cent.
Read more: http://www.dailymail.co.uk/news/article-1343152/The-year-middle-class-squeeze-Why-2011-toughest-12-months-1982.html#ixzz19mxMGw00
