While first-time buyers had cause to celebrate, cider drinkers found out their tipple of choice would now cost them more. But is the news good or bad for workers? Here’s an overview of the budget as it relates to employment and earnings.
50% tax rate on earnings over £150,000. The UK will now have the second most expensive tax regime for senior executives among G20 countries. This could drive the business elite abroad and will have an impact on where companies choose to locate their top executives.
Personal allowance (the amount you can earn before tax kicks-in) freeze. Usually the personal allowance increases in line with inflation which the Chancellor predicts will be 3% this year. But this year, the allowance has been frozen.
Personal allowance withdrawal. Another move that targets high earners; potentially the 650,000 people earning more than £100,000 a year could lose out.
Restriction on higher-rate tax relief on pension contributions. Higher-rate pension relief will be lowered to 20% for those earning £180,000 from April 2011. Anyone earning above £130,000 will have employer pension contributions added to their pay to give a total income. And those who earn more than £150,000 will lose 1% of their tax relief for every £1,000 they make.
1% National Insurance increase in 2011. This will affect employees earning £20,000 or more.
Confirmation of public sector pay freeze and pension reform. Pensions are looking decidedly less generous and there’s a 1% cap on basic pay increases for 2011-12 and 2012-13. Top earners will have their pay frozen. In addition to this, one third of public sector workers will be relocated out of London. All of which translates to an estimated cost saving of £4 billion.
Jobs guarantee for young people extended to March 2012. This is the scheme entitling 18 - 24-year-olds to training or a job if they’ve been out of work for six months or more.
Default retirement age rethink. The Chancellor has confirmed the government may either scrap or raise this in the summer.