Sarah Davidson has given us her take on today’s Budget announcement (Picture: Metro.co.uk)
National insurance slashed, public spending maintained and a smattering of crowd-pleasing changes, including to child benefit, the tax-free Isa allowance and fuel duty.
The Chancellor Jeremy Hunt delivered his Budget statement in the House of Commons earlier today, claiming his measures would put hundreds of pounds back into British workers’ pockets.
Will they? Metro unpicks the big ones to tell you what you really need to know about today’s announcements.
For the full rundown on the Spring Budget, read Metro’s full coverage here.
Will I pay more tax?
Short answer, yes.
Earlier today Hunt said: ‘the way we tax people’s income is particularly unfair.’
He said: ‘If you get your income from having a job, you pay two types of tax – National Insurance Contributions and Income Tax.
‘If you get it from other sources you only pay one. This double taxation of work is unfair.
‘The result is a complicated system that penalises work instead of encouraging it.’
To address this unfairness, Hunt announced that from April 6, employee national insurance will be cut by another 2p, from 10% to 8%. And self-employed national insurance will be cut from 8% to 6%.
This follows a 2p cut announced barely four months ago at the Autumn Statement.
‘When combined with the autumn reductions, it means 27 million employees will get an average tax cut of £900 a year and two million self-employed will get a tax cut averaging £650,’ he said.
Jeremy Hunt revealed his plans at the despatch box this afternoon (Picture: UK Parliament)
Okay, three things to note here.
Firstly, Hunt didn’t mention that, yet again, income tax thresholds would be frozen – and that makes a much bigger difference to how much money you have left after the Treasury raid on your pay packet.
Over the next four years, three million people who currently pay no tax on their earnings will start paying income tax at 20%, according to independent forecasts from the Office for Budget Responsibility (OBR).
Another two million will be bumped into paying the higher rate of 40% and a further half a million more will pay the 45% additional rate.
Overall, workers will pay more tax next year, and the year after and every year following that until the end of the OBR’s forecast period in March 2029.
The tax burden on the British public is already the highest it’s been for 70 years.
According to analysis from the Institute for Fiscal Studies think tank, personal taxes will rise to a record share of GDP by 2028/29.
The Resolution Foundation calculates net personal tax rises will rise £20 billion a year by 2028-29.
The chancellor brought down national insurance, but the tax burden on Brits is still historically high (Picture: Daniel Leal/AFP)
Secondly, when Hunt says ‘double taxation of work is unfair’, he’s not scrapping that or making anything fairer for people who work.
Yes, national insurance will be paid at a lower rate, but workers will still be taxed twice on their income – paying NI and income tax.
Meanwhile, individuals with money to invest pay tax just once because national insurance isn’t levied on money made from money. Fair?
Thirdly, those over the state pension age don’t pay national insurance.
The Resolution Foundation said that means all eight million taxpaying pensioners face tax rises averaging £960 as a result of tax threshold freezes.
What’s actually going on in the economy?
Jeremy Hunt’s big claim today was that cutting taxes would deliver a ‘Budget for growth’.
The Treasury’s statement that followed said the UK’s economy ‘is turning a corner’.
Inflation is expected to fall to its 2% target next quarter, wages are rising faster than prices and better growth than European neighbours.
This is all true, but then so is what the Resolution Foundation had to say on the economy.
What really matters for household income is how much the economy grows per person – gross domestic product (GDP) per capita.
That has fallen by 0.7% across 2023, and hasn’t grown since Q1 2022, the longest runs of falls or stagnation since 1955.
GDP per capita was 4.2% off its pre-cost-of-living-crisis path by the end of 2023, a loss equivalent to nearly £1,500 per person in annual GDP terms.
What does the Budget mean for my money?
It’s tempting to read too much into fiscal statements, which is what the Budget is.
There are so many other factors that affect how much money you have left at the end of the month – or indeed whether you’re forced to borrow to cover your costs.
The big one is interest rates, which at 5.25% are still at a 15-year high.
One in three households in the UK has a mortgage to pay. Millions are already feeling the pain of monthly repayments shooting up by hundreds of pounds when their cheap fixed rate deals end.
There are plenty of other major concerns facing households at the moment.
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Rents have gone up £10 a month for every £100 in just 12 months. They’re likely to keep rising at pace as landlords struggle to cover higher mortgage costs.
Tenants are also being evicted in droves as landlords, struggling to make ends meet, sell up.
Government figures show there has been a 50% surge in the number of Section 21 eviction notices served to tenants, where there is no reason given.
Polly Neate, chief executive of Shelter, said: ‘Homelessness is a political choice. In the final Budget before a General Election, with the housing emergency spiralling out of control, the chancellor has chosen inaction.
‘By ignoring the vast number of people losing their homes, he is harming both the economy and people whose lives are being wrecked by homelessness.’
Then there are the day-to-day essentials. Food costs around 25% more than it did two years ago.
Train fares went up 4.9% this week across England, slapping hundreds of pounds more onto annual season tickets for some routes.
The cost of a flexi-ticket for two days travel a week over a year has also soared. Commuters travelling from Cambridge to London will see their fares rise £337.
Brits are spending more money on travel, with rail prices being hiked (Picture: PA)
Broadband and mobile providers are set to hike prices mid-contract by as much at 8% this year, adding around £120 to annual bills, according to Which?.
Insurance premiums have also rocketed over the past year, with the Association of British Insurers clocking an average 29% rise in car insurance quotes given to UK drivers.
Home insurance premiums were already up by over 36% in the 12 months to October 2023, according to Consumer Intelligence.
The OBR forecasts published today show a rise in insurance premium tax receipts every year over the next five, indicating that premiums are likely to keep going up.
There is some relief in store for household finances. Energy regulator Ofgem confirmed that between April 1 to June 30 2024 the energy price cap is set at £1,690 a year for a typical household.
That’s a dramatic fall from January 2023’s high of £4,279 a year but will be cold comfort for the 6.5 million UK households living in fuel poverty as of January 1 2024, according to charity National Energy Action.
Are there any hidden tax rises in the Budget?
When are there ever not?
Labour leader Sir Keir Starmer was swift to point out what he called ‘a Tory con’.
Nearly all personal tax thresholds remain frozen, dragging millions more people into paying more tax – it’s been the flagship stealth tax in the Conservatives’ wheelhouse since 2021.
The other big tax hike – and it’s huge – is at local government level.
The County Councils Network said in February that 95% of local authorities in England have confirmed plans to raise council tax by 4.99% from April – the maximum hike allowed by law.
Four local authorities – Birmingham, Woking, Slough and Thurrock – have special dispensation to raise council tax by 10%.
Last night Birmingham City Council voted for a 21% rise in council tax over two years after admitting last September that it had run out of money.
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Woking Borough Council’s share of the annual Council Tax charge to rise by 9.99% from 1 April 2024, Slough is planning a rise of 8.5% and Thurrock a 7.99% hike, 2% of which will be used to pay for adult social care.
Torsten Bell, Resolution Foundation chief executive, said: ‘The tax cuts announced today to sweeten the Government’s election pitch rely on the prospect of a sour £19 billion of post-election tax rises, and the fiscal fiction that another £19 billion of cuts to public services can be delivered in a spending review that the Treasury today confirmed will not take place until after polling day.
‘For all that, the big picture has not changed at all with this Budget. Britain remains a country where taxes are heading up not down – rising by the equivalent of £3,900 per household – and where incomes are set to remain below their level at the last general election when voters return to the polls.’
What about spending on public services?
Hunt was widely expected to announce public spending cuts today to pay for slashing national insurance.
Instead he kept to his Autumn 2022 promise to increase day-to-day spending on public services by 1% a year after inflation.
This came with a caveat – a ‘landmark Public Sector Productivity Plan that restarts public service reform and changes the Treasury’s traditional approach to public spending’.
The gist is that public spending proposals will be approved if they wash their face within five years – in other words, they’re cost-neutral over the course of a parliament.
The NHS is funded directly by central government, with Hunt confirming today he’s signed off the health service’s spending plans for next year in full.
The NHS is reliant on funding from Westminster (Picture: Thomas Krych/ZUMA Press Wire/Shu)
It’s worth noting that most other public services are funded by local government, including road maintenance, education, waste and recycling, public safety, social housing and, critically, social care.
And councils across England are in a dire financial situation.
Shaun Davies, chair of the Local Government Association, bemoaned the lack of measures to ‘adequately fund the local services people rely on every day’.
Councils’ core spending power in 2024/25 has been cut by 23.3% in real terms compared to 2010/11.
‘It is unsustainable to expect them to keep doing more for less in the face of unprecedented cost and demand pressures,’ Davies said.
‘Councils of all political colours are starting this financial year in a precarious position and having to scale back or close a wide range of local services, so the continued squeeze in public spending in the years ahead is a frightening prospect for communities.’
LGA analysis shows cost and demand pressures have added £15 billion to the cost of delivering council services since 2021/22.
Almost two thirds of spending for councils with social care responsibilities was spent on services for adults and children – up from 56.5% in 2016/17.
Was there help on housing?
Hunt scrapped the furnished holiday lettings tax regime on the basis it is ‘creating a distortion meaning that there are not enough properties available for long term rental by local people’.
This tax relief allows landlords renting out their properties on a short-term basis to pay no income tax on their mortgage costs.
Between 2017 and 2021, this was phased out for buy-to-let landlords renting out properties on leases longer than six months.
Along with a number of other changes, it triggered a mass exodus of private landlords whose profits were wiped out.
Some opted to switch to short-term holiday lets; others simply sold up. As a result, the number of rental properties available has plummeted – leading to staggering rent hikes across the country.
It’s likely that this change will lead to even more rented homes going on sale, most of which are likely to be bought by homeowners.
Homeowners and buyers will be affected by today’s announcements (Picture: Getty Images)
Also announced today was a cut in the higher rate of Capital Gains Tax for residential property disposals, from 28% to 24% from April 6 2024.
Ben Beadle, chief executive of the National Residential Landlords Association, dismissed the both plans, saying they will make ‘no meaningful difference to the supply of long-term rental properties’.
As Starmer pointed out, there was also nothing on affordable homes.
‘Where is the urgency on affordable housing?’ he said today. ‘How can [the Conservatives] look at Britain now and not see this is a massive priority?’
Even more shocking was the absence of any policy on social housing.
Those who rely on housing benefits still do not know if their benefits will be frozen from next year or not.
Beadle said: ‘With an average of 11 tenants chasing every home for private rent, social housing waiting lists at 1.3 million, almost 110,000 households in temporary accommodation and the number of first-time buyers slumping, the Budget needed to tackle the housing crisis once and for all.
‘What we got was a deafening silence. This was a missed opportunity to make providing new homes to rent and buy the priority it desperately needs to be.’
What else was announced that affects my personal finances?
There were several ideas announced today, all of which sound good but many of which probably won’t make a big difference to most people in practice.
Isa reform
Hunt wants us all to invest more, so he’s introducing a British Isa, which will give all UK adults a £5,000 tax-free allowance to invest in UK equities.
That takes the overall annual Isa allowance to £25,000 a year.
Experts were not convinced, with AJ Bell issuing a statement saying it was ‘doomed to fail’.
Michael Summersgill, the investment platform’s chief executive, said: ‘Increasing investment into UK companies is a laudable aim, but this ill-conceived, politically motivated decision will simply not achieve that objective.
The impact on the UK stock market from the new British Isa will be a ’rounding error’, an expert said (Picture: Getty Images)
‘50% of the money our customers currently invest through their stocks and shares Isas is invested into UK assets, so this new allowance will have no impact whatsoever on their investment behaviour.
‘A tiny minority of people max out their £20,000 ISA allowance each year, but these are the only ones that will see any benefit from the additional British ISA allowance.
‘In the context of the £2tn+ UK stock market, any additional investment generated by these investors through the British ISA will be a rounding error.’
NatWest shares
The chancellor announced that the government intends to sell part of its shareholding in NatWest to retail investors, subject to supportive market conditions and achieving value for money.
To be continued.
Non-dom tax status scrapped
Labour argues that Hunt pinched the idea to abolish the controversial non-domiciled tax status that allows the wealthiest living in Britain to pay substantially less tax than UK residents.
Regardless of whose idea it was, from April 2025 new arrivals to the UK will not be required to pay any tax on foreign income and gains for their first four years of UK residency.
After four years, those who continue to live in the UK will pay the same tax as other UK residents.
Critics say it’ll lead to very rich people leaving the UK and therefore not contributing to the economy.
Supporters point to previous changes to the regime, which resulted in a few leaving but far fewer than was warned.
Childcare
Hunt bowed to calls to make child benefit fairer after leaving rates unchanged for 11 years.
Currently, if either you or your partner earns over £50,000, you’ll lose some of the child benefit on a sliding scale until one of you earns £60,000 – at which point you’re not eligible for any child benefit.
You repay the benefit at a rate of 1% of the benefit amount for every £100 you earn over that £50,000 threshold.
It means if you earn £55,000, you lose 50% of the benefit – because you’re £5,000 over the limit, and at a rate of 1% per £100, that equals 50%. The exact amount of money you lose depends on how many children you’re claiming for.
Parents will be impacted by changes to child benefits and childcare (Picture: Getty Images)
Today, Hunt announced that from this April the High-Income Child Benefit Charge threshold will be raised from £50,000 to £60,000. The top of the taper at which it is withdrawn to £80,000.
Laura Suter, director of personal finance at AJ Bell, explains the change: ‘From April that ratio will change so that you lose 1% of the child benefit amount for every £200 you earn over the new threshold of £60,000, meaning you lose child benefit at a slower rate than currently.
‘It means that someone earning £70,000 will lose 50% of the child benefit they’re entitled to, while someone on £75,000 will lose 75% of the child benefit amount.’
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