Summary of Budget 2008 Proposals

29 November 2007

The Treasury and Resources Minister, Senator Terry Le Sueur, will be presenting the 2008 budget in the States on 4 December 2007.

In recognition of the States healthy financial position and positive decision on GST the Minister will be announcing significant additional relief to those taxpayers on lower incomes, tax credits for those in the poverty gap, large increases in tax allowances for parents with children, and extended discounts of stamp duty for first-time buyers. These will be in addition to the standard proposals for Impôts duties and other minor income tax changes.

The Minister will be proposing increases in the thresholds at which income tax is paid by 6.5%, well above the rate of inflation currently 3.9%.

The 6.5% increase is made up of an initial 3% increase proposed in the original Budget Statement in October, plus a further increase of 3.5% arising out of the commitment given by the Minister during the recent GST exemptions debate to compensate low-to-middle income households for the effects of GST.

The 6.5% increase in tax thresholds will mean that a married couple will pay £320 less in tax than in 2007.

This increase in income tax exemption limits is in addition to a 20% increase in the tax allowances for children and students in higher education. A household with two children, one at university will be at least a further £300 better off.

The Minister will also propose raising the value of properties on which first time buyers pay reduced stamp duty to £300,000. This means a first time buyer will save almost £2,000 on the stamp duty due on a £300,000 property.

The combination of the increases in income tax exemption thresholds and allowances are designed to reduce the impact of GST on low and middle earners, particularly those with families.  If approved, it will mean a working couple with 2 children (one at university), paying about £14,000 interest on their £200,000 mortgage, can earn over £46,000, before they start to pay any income tax. Meanwhile the rise in Stamp duty discount for first time buyers is intended to help people entering the property market.

The Minister will also be announcing simpler and more wide ranging pension provision for those individuals wanting to invest in private pension products. The proposals provide for a new trust vehicle which will offer greater choice and a more cost effective, flexible and transparent pension option.

There are also proposals to simplify income tax processes with the announcement that from January 2010 self assessment and submission of all personal tax returns will be also be available through the Income Tax electronic online service. As an incentive to taxpayers a £20 credit will be offered when they file their return and self assess electronically.

Finally the proposed transfer of £25 million to the Stabilisation Fund will be particularly welcomed by the business community and will mean that the Island is better placed to stimulate the economy in less buoyant times, to improve economic stability, contain inflation and create the conditions for sustainable economic growth in the Island .

The Budget Statement 2008 is available online at www.gov.je and from the States Greffe bookshop.

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Notes to Editors:

1. The States sitting to debate the Budget Statement 2008 will begin at 9.30 on Tuesday 4 December and is expected to run for a couple of days
2. Senator Le Sueur can be contacted on telephone 863994.

   TAX FACTS

   Income Tax Exemption Thresholds for Year of Assessment 2007 to 2008

   Exemption Thresholds	Year of Assessment 2007	Year of Assessment 2008	Increase	Tax Saving @ 27%
   Exemptions
   - Single Person	£11,300	£12,040	£740	£200
   - Single Person (aged 63+)	£12,610	£13,430	£820	£221
   - Married Couple	£18,130	£19,310	£1,180	£320
   - Married Couple (aged 63+)	£20,760	£22,110	£1,350	£365

    

   Exemptions

   Increases in tax exemption limits were approved in last year’s Budget as part of the revised 20% means 20% proposals at 2.5%. A further increase to 3% was included in the original Budget Statement 2008. The Minister is now proposing that this increase to 6.5% as part of the commitment given to low to middle income households during the GST exemptions debate. The income tax exemption thresholds will increase by a further 3% for 2009.

   Increase in Income Tax Allowances from Year of Assessment 2007 to 2008

   Allowances( for each child)	Year of Assessment 2007	Year of Assessment 2008	Tax Saving (@ standard 20% rate)	Tax Saving (@ marginal 27% rate)
   - Child Allowance	£2,500	£3,000	£100	£135
   - Child Allowance (higher education)	£5,000	£6,000	£200	£270

   The increase in child allowances are available to both marginal and standard rate taxpayers and are not affected by the 20% means 20% measures

   TAX FACTS

   The following Tax Facts provide an illustration of the existing personal tax structure and also provide relative comparisons against other jurisdictions.

   The tax threshold, i.e. the point above which an individual starts to pay income tax, is determined by the individual’s personal circumstances.  For example, a married couple, who are both working and have two children (one at university) with a mortgage of £200,000 and paying mortgage interest of £14,500, do not become liable to income tax in 2008 until their income exceeds £46,810 calculated as follows:

                                                                       2007                          2008

   Married Couple Exemption                  £18,130                     £19,310

   Wife’s Earned Income (max)                £4,500                       £4,500

   Child Allowance                                       £2,500                       £3,000

   Child Allowance (higher)                       £5,000                       £6,000

   Mortgage Interest                                £14,000                     £14,000

                                                                    £44,130                     £46,810