Four examples of people that will be affected by Monday’s pre-Budget report and how.

EXAMPLE 1 - HIGH EARNER

High earners will see a significant increase in their annual tax bill over the next three years.

Drastic changes to personal allowances and National Insurance in 2010, and the top rate of income tax in 2011, will penalise those earning £100,000 or more.

As of April 2010 an individual who earns £200,000 will pay an extra £2,414 as a result of losing their personal allowance, and an additional 0.5 per cent in National Insurance contributions. From April 2011 they will also be subject to a 45 per cent tax charge on earnings above £150,000, equal to £2,500.

This means that by 2011 their tax bill will be almost £6,000 more than it is now, according to PricewaterhouseCoopers.

Top rate income taxpayers may be more inclined to use pensions as a way to avoid paying the highest rates of income tax, but will have to be careful not to exceed the annual allowance of £255,000 for retirement funds, which will come into effect in 2011.

Savers who have built up a large pension pot will be disappointed that the lifetime fund allowance has been frozen at £1.8m until 2016. Those who save more than this will be charged 55 per cent tax on the excess.

EXAMPLE 2 - BIG SPENDER

Spenders planning a lavish Christmas will benefit from the reduction of the standard rate of VAT from 17.5 per cent to 15 per cent from 1 December.

Consumers will see prices fall on a range of items from cars to electrical goods for 13 months.

A £400 high definition TV will come down to £391.48, while the cost of a £125 i-pod will be reduced by £2.66 and a digital camera will be £127.23 rather than £130.

Although the chancellor has asked shops to pass on the tax cut to consumers as soon as possible, prices may not fall immediately, according to the British Retail Consortium.

But while the 2.5 per cent reduction in VAT is good news for shoppers, it is not certain whether it will be enough to entice them to spend more, especially when viewed alongside the 20 per cent discounts that have been offered by high street shops such as Marks & Spencer and Debenhams in the run up to Christmas.

Where relatively big savings are to be made, such as on a £20,000 car, accountants say affluent consumers are unlikely to be swayed by a saving of just over £400 into committing to expensive purchases in the current economic climate.

EXAMPLE 3 - HOMEOWNER

Homeowners struggling to meet mortgage payments have been offered a helping hand by the government.

Recent reductions in interest rates have not been passed on by all lenders, leaving some homeowners unable to pay mortgage bills.

But those homeowners unable to meet payments will now have three months grace before banks can initiate proceedings against them. The moratorium on action by lenders against borrowers should help families put a workable repayment plan into action, and reduce the number who face repossession.

Individuals who lose their job will also be able to claim more help with mortgage payments.

Income support for mortgage interest will be paid out after 13 weeks instead of the current 39 weeks and will also be increased to cover £200,000 of mortgage interest, rather than £100,000. However these changes will not come into effect until April, which could be too late for some.

Estate agents voiced concern that as no specific measures to aid buyers have been announced, homeowners who need to sell their property will still face problems, although the reduction in VAT will aid those looking to make improvements to their property in order to increase it’s chances of being sold.

EXAMPLE 4 - PENSIONER

Pensioners will find themselves a little better off earlier than they might have expected.

In addition to an extra £4.55 a week from next April, as the state pension for individuals rises from £90.70 to £95.25 in line with prices, all pensioners will receive an extra £60 lump sum in January, on top of the Christmas bonus in December. However, the extra £60 is simply the equivalent of bringing forward the annual state pension increase from April to January – and so is subject to income tax.

But pensioners eligible for the Pension Credit will benefit from an above-indexation increase in the minimum income guarantee to £130 a week for single pensioners and £198.45 for couples in 2009-10.

However, low-earning pensioners have still not been fully compensated for the abolition of the 10p starting rate of income tax in April 2008. The £120 increase in the personal allowance, which has been made permanent in this pre-Budget Report, still leaves some £75 a year worse off.

Pensioners are also unlikely to benefit significantly from the cut in the VAT rate from 17.5 per cent to 15 per cent, as it will have no effect on fuel and food bills.