How will mini budget announcements affect UK households?

Households will see their finances disrupted following the mini-budget presented by Chancellor Kwasi Kwarteng, including a series of tax cuts.

Here’s a look at what this could mean for you.

– Home movers

Permanent stamp duty reductions in England and Northern Ireland could encourage more people on or up the property ladder.

The ‘zero rate’ stamp duty bracket will be doubled from £125,000 to £250,000.

First-time buyers will pay no stamp duty up to £425,000. First-time buyers will be able to access the relief when they buy a property costing less than £625,000 instead of the previous £500,000.

The measures will reduce stamp duty bills for all movers by up to £2,500, with first-time buyers able to access up to £8,750 in relief.

But potential buyers still face hurdles from rising mortgage rates and soaring property prices, making it more difficult to collect a down payment.

Given all the recent Bank of England base rate hikes, a tracker mortgage now costs around £210 a month more on average than it did before the rate hikes started last December, according to figures from UK Finance.

(PA graphics)

A standard variable rate (SVR) mortgage now costs around £132 more per month.

Estate agents Savills said the main beneficiaries of the stamp duty changes are likely to be first-time buyers in London and the more expensive parts of south-east England.

The government said it would provide further details to increase housing supply in the coming weeks.

Government documents also say the Scottish and Welsh governments will “receive funds through the agreed budget framework to allocate as they see fit”.

– Taxpayers

A 1 pence cut in the basic rate of income tax will take place a year earlier than planned.

From April 2023, the basic rate of income tax will rise from 20% to 19% and will mean that 31 million people will be better off by an average of £170 a year.

The additional rate of tax will also be abolished from April 2023.

Also from April 2023 there will be a higher single rate income tax of 40%, instead of an additional 45% on annual income over £150,000.

This means that all annual income over £50,270 will be taxed at 40%, the currently higher rate of income tax.

The government has said high tax rates hurt the UK’s competitiveness.

But some argue the move could fuel inflation.

Infographic from the AP showing the basic rate of UK income tax
(PA graphics)

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Our research shows that top rate payers are much more likely to have wiggle room in their budgets, and significantly more likely to do so while we let’s get through the cost of living crisis. .

“So those who are least desperate for help will get the most.

“Put money in the pockets of high earners also increases the risk of inflation. If they don’t need that extra money to fill a hole in their budget, there is a risk that their expenses will increase, further driving up prices.

The 1.25 percentage point hike in national insurance contributions, which took effect in April, will also be reversed from November. This means 28million people across the UK will keep an extra £330 a year, on average, in 2023/24, the government says.

– Savers

Those who would otherwise have been additional rate taxpayers will benefit from a tax-free personal savings allowance of £500 from April 2023, in line with higher rate taxpayers. This was not available to them before.

The Personal Savings Allowance allows people to earn certain amounts of interest without paying tax on it.

There could also be a dash for high earners to pile money into their pensions while they can still get 45% relief on the cost of saving for their retirement.

Former pensions minister Sir Steve Webb, who is now a partner at consultants LCP (Lane Clark & ​​Peacock), said: ‘There is likely to be a flurry of activity among the highest earners of Britain looking to make the most of the opportunity to get tax relief. 45% on their pension contributions.

– Energy bill payers

The Government has previously confirmed the Energy Price Guarantee, which will reduce the unit cost of electricity and gas so that a typical household in Britain is paying, on average, around £2,500 a year on its energy bill, for the next two years, starting October 1.

The £400 energy bill support scheme will be paid across Britain in six monthly installments from October, with additional support for particularly vulnerable households.

Together, the Price Guarantee and Support Scheme will save the typical household at least £1,400 for next year compared to the October 2022 price cap.

But charities have warned that many households are already struggling financially and struggling with bills.

– Workers

Plans include legislation to force unions to put pay offers to a member vote so that strikes can only be called once negotiations have completely broken down.

Universal Credit applicants who earn less than the equivalent of 15 hours per week at the National Living Wage will need to meet regularly with their work coach and take active steps to increase their income or face a reduction in their benefits.

The change is expected to bring an additional 120,000 people into the more intensive job search scheme, ministers say.

The government said average real wage growth in the UK had been broadly stagnant for 15 years, largely due to weak productivity growth.

He argues that the only sustainable way to raise living standards and fund vital public services is to unleash growth, including helping the unemployed find jobs and those in employment get better-paying work.

To support working families, the government has also said it will propose reforms to improve access to affordable and flexible childcare.

– Jobseekers

Job seekers over the age of 50 will benefit from additional time with work coaches from the employment centre, to help them return to the labor market.

Growing economic inactivity among the over-50s is contributing to labor market shortages, driving up inflation and limiting growth, the government has said.

– Bankers

The government has said removing a cap on bankers’ bonuses will encourage global banks to create jobs and invest, but critics say it will see the return of a ‘culture of greed’.

– Alcohol drinkers

Alcohol tax will be frozen from February 2023.

The tax cut will save the consumer 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits, according to the government.

– Independents

Some self-employed people will again have to make sure they pay the right tax by determining their employment status themselves.

The Chancellor said he would scrap changes in 2017 and 2021 which shifted this responsibility to employers when a person provided services through their own business or another intermediary.

Changes to the IR35 rules would be repealed from April next year, the government said.

“From that date, workers providing their services through an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions,” he said. .

“This will free up time and money for companies hiring contractors that could be spent on other priorities.”

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