The setting of Budget Day could have allowed Prime Minister Jeremy Hunt to set the stage for the election by announcing major tax and spending plans.
The details of his script can have a huge impact on your finances. So here's what his plan means for you.
National insurance will be cut
The Prime Minister's big play for the audience was to reduce National Insurance (NI) rates paid by 27 million workers across the UK. A percentage of the amount earned from his salary will be deducted in his NI.
According to available data, January marked the first reduction in Type 1 National Insurance for employees since at least 1975, and perhaps for the first time in history. The next event will be held in exactly three months.
For employees whose annual salary is between £12,571 and £50,270, the current NI tax rate is 10% on income (down from 12% before January) and 2% on income above that. The Prime Minister said this would fall to 8% in April.
A person earning £25,000 a year would save an additional £249 a year with the changes. The investment firm estimates that high-income earners will receive an extra £754 a year in take-home pay.
For self-employed people, Class 4 NI contributions on all income between £12,570 and £50,270 were already due to be reduced from 9% to 8% in April. Hunt said that going forward, that percentage will drop to 6%.
But more people will pay taxes
Under current government policy, the income tax threshold will be frozen from 2021 and will remain frozen until at least 2028. That means any kind of raise could push you into a higher tax bracket, or cause your income to be taxed more than usual. Otherwise expected.
Normally these thresholds would be expected to rise in line with prices, so economists say this would equate to a £40bn tax increase.
The Office for Budget Responsibility (OBR), the UK's official forecasting body, estimates that nearly 4 million more people will pay income tax by 2029 as a result of this policy, and 3 million people will move into higher income brackets. ing.
The overall effect of the 4% NI cut and the benchmark freeze from 2021 to April this year is that people on incomes below £25,000 will be far worse off, and those on incomes between £26,000 and £60,000 will be far worse off. will be better off and people between £60,000 and £60,000 will be better off. At 120,000 you can barely tell the difference.
Other taxes will also increase
Some councils are facing severe financial pressures, with the majority planning cuts to local services. Outside of Scotland (where it is frozen until 2025) council tax is due to rise in April.
England's parliament has until March 11 to decide on the amount. People with social care obligations can have their council tax increased by up to 4.99% without triggering a referendum. Some companies allow you to raise up to 2.99%.
In some places, such as Birmingham, where council tax will rise by 21% over two years, increases of more than 5% are possible with government permission.
The proposed increases range from 3% to 16% in Wales and between 4% and nearly 10% in domestic tax rates in Northern Ireland.
VAT (a tax added when you purchase most goods and services) will remain unchanged.
Expand child allowance to more households
The point at which child allowances are discontinued is at a higher income level.
Instead of child benefit starting when at least one parent earns more than £50,000 a year, the amount will be £60,000. Instead of £60,000 a year, the full £80,000 will be taken away.
This benefit is worth £24 per week per child and £15.90 per additional child. These amounts are set to rise to £25.60 and £16.95 per week in April.
The plan is to transition to a system based on household income rather than individual income by April 2026.
Living expenses support
Direct payments to people on benefits, pensioners and some people with disabilities are a lifeline for many dealing with high prices and bills.
No further subsistence payment plans were announced as domestic gas and electricity prices fell in April.
However, there was new funding for the Household Support Fund, which the council used to help people in need buy essentials and find a warm place. It was scheduled to end this month, but will be extended for another six months. The council had asked for a further two-year extension.
The £90 fee for a debt relief order, which helps some people cancel their debts, will be scrapped, although some people received grants to do so. The repayment period for people on Universal Credit to repay their budget loans has been extended from 12 months to 24 months.
Fuel tax cut to be extended
Fuel tax is a tax that motorists pay when they purchase fuel such as gasoline or diesel.
It has been frozen since 2011 and will continue to be frozen. Indeed, Mr Hunt has extended the 5p per liter fuel tax cut, which was due to end this month, for a further year, keeping it at 53p per liter, saving the average car driver an estimated £50 next year.
Vape and Smoking Getting More Expensive
These so-called sin taxes will eventually be increased, this time to include new duties on e-cigarettes.
Vaping products are already subject to value added tax (VAT). A separate tax will be imposed from October 2026. At the same time, tobacco tariffs will also rise.
The liquor tax freeze will be extended until February next year, so alcohol prices will not rise.
UK Isas for savers
Savers will now have access to a new tax-free Individual Savings Account (Isa). Investment funds will be directed to British companies.
Savers will be allowed to save up to £5,000 a year into a UK Isa on top of their existing Isa allowance of £20,000.
Property tax changes
The government has already started cracking down on holidays.
Additionally, the Chancellor will now scrap a range of tax breaks for holiday home owners. For example, there are allowances for furniture, etc.
The higher real estate capital gains tax rate will be reduced from 28% to 24%. This affects some people who are selling a property that is not their home.
Elimination of non-dom tax status
This is used by people who live in the UK but whose primary tax residence is outside the UK.
Non-domiciled people only pay UK tax on money they earn in the UK. However, this status is due to be abolished from April 2025 and replaced by a new system, potentially increasing UK taxes on such people and increasing government revenue.
Benefits, pensions and wages – what we already knew
In the autumn, the Prime Minister announced that universal credit and other benefits received by millions of people would rise by 6.7% in April, in line with inflation (as of September).
Benefits are fully devolved to Northern Ireland, but the changes will be similar to the rest of the UK.
As previously announced, the state pension will rise by 8.5% in April. So its value is:
- Full new fixed state pension of £221.20 per week (for people who reached state pension age from April 2016 onwards)
- The full amount of the old basic national pension is now £169.50 a week (for people who reached national pension age before April 2016)
It was also learned that the National Living Wage paid by employers for over-23s will rise from £10.42 an hour to £11.44 an hour in April, and that young workers will receive a similar rise.