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3 Oct 2014
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coins Mr and Mrs Mackenzie and the 2002 Budget
by John Whiting, tax partner at PricewaterhouseCoopers
On the day before the Budget we spoke to Mr and Mrs Mackenzie about their expectations. Tax analyst John Whiting now looks at how they will be affected.

You can also listen to the Chancellor defend his Budget and hear the responses of the opposition parties

Like everyone in the country, Mr & Mrs Mackenzie will be wondering whether the Budget will take more in National Insurance Contributions (NICs) from them than it will give back in help with the costs of their children.

The extra NIC bill that Mr Mckenzie will pay from next April is simply calculated. For employees and the self-employed, all earnings over £4,615 a year will attract an extra 1% NIC. That means a further £304 for him to pay. But as a partner in a firm that has a number of employees, he'll also be paying his share of his firm's extra employer's NIC bill. That - the real shock in the Budget - costs employers some £4bn overall through the 1% extra on all the pay over £4,615 of each of their employees.

But what about the various child tax credits?

It seems the Mackenzies will do quite well out of this. Their income is above the level that qualifies for the current Working Families Tax Credit, which includes various child-help components. They do currently qualify for most of the existing children's tax credit - worth about £490 to them. From next April, the Chancellor talked about families such as theirs getting some £1,400 help through the new integrated Child Credit - so even after losing the existing children's tax credit, they may well end up some £900 better off. That, of course, wipes out their extra NIC bill and still leaves them in credit - to the tune of over £10 a week.

Inevitably with Gordon Brown (and indeed tax changes generally) the devil is in the detail. The whole scheme of the new tax credits remains to be fleshed out properly: the Mackenzies will in due course have to register for the credits and the final figures that Mrs Mackenzie gets - because the child credit will go to the "primary carer" - may yet be rather different.

For individuals, the other changes in the Budget pale into insignificance besides NICs and the various tax credits. There are - or will be in due course - benefits in there for those who like beer from small breweries, play bingo, have help at home with child care, and drive CO2-friendly vans. Smokers, inevitably it seems, end up paying a bit more for their habit but drivers in particular can breathe a sigh of relief that the Chancellor hasn't compounded oil price rises with further fuel duty increases.


Check how the Budget will affect you with this Budget calculator.
In depth Budget analysis from BBC News.

John and Ferelith Mackenzie from Weymouth.
Listen - interview with the Mackenzies the day before the Budget
A photograph of Labour Party Chancellor of the Exchequer Gordon Brown
Chancellor Gordon Brown
Listen - Chancellor Gordon Brown defends his Budget
A photograph of Conservative and Unionist Party Leader Iain Duncan Smith.
Tory Leader Iain Duncan Smith
Listen - Conservative leader Iain Duncan Smith says the NHS needs reform rather than more money
A photograph of Liberal Democrat Party Leader Charles Kennedy
Lib Dem Leader Charles Kennedy
Listen - Liberal leader Charles Kennedy welcomes the Chancellor's willingness to raise taxes
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