Blog: Doom and gloom, but with a light touch

This is a cleverly managed budget, writes independent financial adviser Philippa Gee, from Church Stretton.

What with the warnings of doom and gloom, we expected the worst and actually got a lighter touch. Now that's good spin.

It's symbolic that the red budget box, 150 years old, is being used for the last time today as it is considered too fragile. The concern is that this is a reflection of the economy as well, but I believe that these announcements are exactly what we need to do in order to build a long-lasting strength into the economy. They are not as hard as they could have been and are fair and transparent.

VAT

With VAT increasing from January 2010, we are likely to see a major rise in the order of VAT liable items for the rest of this year – builders should be preparing themselves for a very busy time in the next five months as people look to get work done within the lower VAT environment. From January the VAT will rise. This will hurt but it is a necessary evil.

CGT

The increase to CGT from midnight tonight for higher rate taxpayers is unavoidable and will make the system fairer, as many higher rate tax payers have previously been taking out capital gains to provide an income with a lower tax rate. In fact this will continue as it is still a lower rate than income tax but means that any sale of asset needs careful consideration to make sure it is the most appropriate action. There are ways of avoiding tax and there are more tax friendly investments, such as ISAs and the value of these will increase further as more people understand their importance.

INCOME TAX

A fair solution for all.

10 TIPS TO SAVE MONEY

If you are concerned that the Budget means you will have less income to spend – what can you do?

1. Whatever your budget, you must know what money is coming in and going out each month. It may seem simple, but many don't have a grip on their finances and end up overdrawn each month without understanding why.

2. Look at cutting the cost of your bills immediately. Have you shopped around for cheaper insurance, utility bills and telephone services?

3. Go through your bank statements and make sure that there are no old direct debits that should have been cancelled but haven't, such as out of date magazine subscriptions or memberships you no longer use.

4. Consider gym costs – do you really need to pay this every month, or is there a local running club you could join? You could also cut down on petrol if your workout is on your door step, rather than a car journey away.

5. Look at the costs of eating out – could you start a dining club with friends, rotating whose house you eat at and cutting down the cost considerably for everyone.

6. Work out a fixed weekly amount you can afford to cover non essentials and withdraw that sum in cash at the beginning of the week, giving you no opportunity to overspend.

7. Do not take your cards out with you – it will only encourage you to spend. If you have to wait at least 24 hours until you are in a position to buy something, the need may well reduce.

8. With the increased use of applications on mobile phones, the ability to shop at the mere touch of a button can be dangerous for those easily tempted – delete the shopping apps for a while, while you get your finances sorted out and avoid temptation.

9. Do try to build up an emergency fund, no matter how small, by saving a monthly amount – if you set this up by a regular automatic payment, it is more likely to happen, than waiting for the end of the month to see what is left.

10. Interest rates are low but there are still competitive savings accounts out there – look again at what is available and don't accept accounts you have had for many years, as these are unlikely to be paying decent rates.

NEWS FOR INVESTORS

This budget, believe it or not, is actually good news for investors, as it will put the UK economy on a much stronger footing. This will mean that both equity and bond investors should be placated that their investments should remain appropriate and that the longer term prognosis of the economy will be significantly stronger.

The issue to be aware of is that with spending reducing significantly, investors should be very careful about which sectors they invest in and review their investments as soon as possible. Using a fund manager rather than having individual stock could reduce this headache, but seeking Independent Financial Advice is essential.

Plans for a green investment bank are spot on, it will be used a great deal by investors whether ethical or not and will help benefit the green economy as well. This is a win win situation.

NEWS FOR COMPANIES

Overall this budget is less of a worry for companies than for individuals and particularly the many smaller companies that exist. Smaller companies have enough to deal with in the current economy and need supporting, so this budget is good news on the whole, leaving these organisations virtually unscathed.

Those considering establishing new businesses in many regions in the UK have received a gift, with NI contributions on employees avoided. This is certainly a golden opportunity for new entrepreneurs.