There was nothing ‘mini’ about today’s mini-budget speech by the new Chancellor, where he gave away billions of pounds hand over fist.
Forget support to those who need it the most.
Instead, the proposed tax cuts will leave the highest earners laughing all the way to the bank, with a kick in the teeth for those on Universal Credit.
Here’s what Kwasi Karteng has chosen to do:
- National Insurance: Reversed the 1.25 percentage point increase in National Insurance contributions introduced back in April, and canceled the proposed Health and Social Care Levy due to be introduced next April. Only affects those who earn enough to pay National Insurance – ie on at least £12,570 a year. Those who earn the most will save the most.
- Additional rate tax: Dropped the 45% additional rate of tax from next April. Anyone earning over £150,000 a year will be delighted – all 629,000 of them.
- Basic rate tax: Cut the basic rate of income tax from 20% to 19% from next April. This affects anyone earning over £12,570 a year. Suspect that extra penny in the pound won’t make a massive difference in the face of rising bills and interest rates, but will be hugely expensive for the Government. Crunching the numbers, I reckon someone on £30,000 a year will be £392 a year better off, with the changes to National Insurance and income tax. Meanwhile someone on say £250,000 a year will be nearly £8,000 a year better off, according to Quilter.
- Stamp Duty: With immediate effect, pushed up the starting point, so buyers won’t pay Stamp Duty on the first £250,000 of a property price, rather than £125,000 currently. In practice, that saves a maximum of £2,500 on your main home. Trouble is, when Stamp Duty was cut during the pandemic, it sent house prices spiralling far higher than any Stamp Duty savings, and a third of the purchases were as second homes or buy to let properties – not exactly the most cash-strapped buyers.
- First time buyers: Also, first time buyers won’t pay Stamp Duty on the first £425,000 of a property purchase, up from £300,000 on properties worth less than £625,000. That’s a saving of up to £6,250. But with mortgage lending typically capped at 4 to 4.5 times salary, you’d need to be a first time buyer with either a mahoosive deposit or a six figure salary to take full advantage.
- Bonuses: Ditched the cap on bankers bonuses. Because they were really struggling with the cost of living crisis.
- Dividends: Reversed the planned 1.25 percentage point increase to dividend tax, that was due to kick in next April. This only helps if you have enough spare cash to invest.
- Investments: Confirmed Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) will continue beyond 2025 and the limits on Seed Enterprise Investment Schemes (SEIS) will go up. IF you’ve never heard of all theses scrambled letters, it’s because these are typically investments that are so high risk they need tax incentives before anyone will consider them – and are therefore only really used by the super rich with money to throw away.
- Pension charges: Removed the 0.75% a year cap on charges on workplace pension schemes. This is supposedly so pension schemes will invest more. Sounds to me as if more people will end up paying over the odds for their pensions.
- Universal Credit: And after all the changes designed to benefit the highest earners, Kwasi has squeezed those on the lowest incomes – by threatening to reduce Universal Credit for those not working enough hours or seeking higher paid roles. There was brief mention of extra support to help over 50s back to work.
- Booze: Cancelled planned increase to duty on wine, beer, cider and spirits. So at least we can drown our sorrows for slightly less.
It is truly breathtaking how this budget is designed to reward the richest and hang those on low incomes out to dry.
Now – over to you. Any thoughts on the mini-budget? Do share in the comments, I’d love to hear.
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