Cash ISA Change and Carers Allowance

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Hello, welcome to this Moneybox podcast. Carers who earned too much and owe thousands of pounds in overpaid benefit may get some of their debt written off. and there'll be no inheritance tax to pay on compensation for the families of the victims who were given HIV and hepatitis by the NHS. But first, the budget.

The Chancellor announced dozens of changes that will affect the money in your pocket from wages to savings, energy bills to tax demands. Many won't happen for some time, years in some cases. So today we'll look at the more imminent tax changes. one of which will affect the pay packets of millions of workers and pensioners and bring in billions of pounds to the Treasury. Appropriately enough, for what was almost a winter budget, the Chancellor announced an extension of the big freeze.

tax thresholds today i will maintain all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028 Maintaining, of course, means freezing, not raising them as they should be raised each year in line with inflation. So as your pay or pensions or other income rises between now and 2031, every extra pound will be liable to tax.

because the tax-free allowances and the thresholds will not have changed for a decade. A year ago, the Chancellor said they'd start rising in April 2028. Now they'll send a chill through our pay and pensions until spring of 2031, well after the next general election. The Chancellor defended her decision on the Today programme on Thursday and admitted it was a freeze.

From 2028, we are going to freeze the thresholds for an additional three years. Obviously, the Conservatives did that for seven years. I do recognise that is asking working people to contribute a bit more, but I've kept that... contribution to an absolute minimum through other changes that I announced yesterday.

Two groups will suffer particularly. People on very low incomes who, as their pay or pensions rise, will start paying tax for the first time. She will add 700-odd thousand to their number. and people with higher incomes at the top of the basic rate band will find every pound is taxed at the higher rate of 40%. Seb, who sent us this voice note, says that's already started for him. Hello, I'm 32 and I just got a pay rise last year. I am just under £51,000, which would mean just indeed.

higher threshold for the taxes and realistically I was hoping that with the freeze being unfrozen in the next few years the threshold would catch up and I actually would go back on the lower tax rate. But because of the freeze, this will not happen for another five, six years. So it's kind of like I'm a bit stuck and it's a bit annoying because that just means I will have to pay more taxes for years to come.

Well, with me in the London studio is Heather Powell. She's a partner at the accountancy firm Blick Rothenberg. Heather Powell said... does a good job there of explaining the difficulty. This is the existing freeze, isn't it, set by the last government due to end in 2028, but now Rachel Reeves says she has to extend it. How much harder will that make things? make it tremendously harder. Taking someone who's earning less than Gary, than Seb, on £35,000 up to 2030.

they will be paying an additional £1,400 and the total percentage of tax that they are going to pay on their income increases. 12.8 to 13.6 percent 13.6 percent of their income will be paid over in tax in 2020 30 31 and for someone on 45 000 It's just over 1,758 and the total tax take increases to 15.6%. The amount you've got left to spend from your pay packet is decreasing.

Each year. And this is because of what we call this threshold freeze. So as your money rises, the tax allowance doesn't. We've called it a stealth tax in the past and people didn't really understand it then. But you think they are now getting to understand the effects of it more.

Absolutely, Paul. And the OBR have highlighted that... That's the Office of Budget Responsibility. Yes, indeed, Paul. Thank you. The household disposable income, the money you've got left to spend, is only going to increase by a quarter of a percent a year. through to 2030, 31. So I think people are really going to notice that notwithstanding pay rises, they're not getting any extra money to spend.

Yes, so we're all going to be, I mean, we're not going to be any richer, effectively, are we? And the Resolution Foundation, which concentrates on people with lower and middle incomes, said most workers would be worse off by this than if the Chancellor had just raised income.

Income tax by a penny, which would have been much more simple, wouldn't it? Indeed. In fact, I think they quoted that it was equivalent to a 3% rise in the base of the greater income tax. Right. So how many people will it affect? Well, we're going to have an additional... £780,000 coming into the basic rate, the 20% tax ban. So these are people who didn't pay tax at all and will now be paying income tax. And now will be moving through because that personal ounce of £12,570 is frozen.

We've got another 920,000 going into the 40% band, the high rate band, over and above the people who would have moved through, and 4,000 who are going into the 45% band. So we've got, well, you know... almost a million people who will be paying tax at 40% or higher. At a higher rate than they have been. So they will certainly feel it, won't they?

We've often talked about pensioners on the programme whose income is solely the state pension being dragged into paying tax among those groups you mentioned. Now, the new state pension will actually be more than the tax-free allowance from April 2027.

Reeves did make a concession on that on the television the other night. Yes, she did. And it's very interesting because basically we're £23 below the allowance from April 26. And she said that from April 27, well, it's going to go through. I think this is the first time a child...

Chancellor has confirmed that, actually, so it's quite interesting. But what's the concession? Well, the concession is she's going to work out how she's not going to take tax from them. She's saying the small amounts of tax for these pensioners are only getting the state pension, which is more than the tax...

tax-free allowance will not be asked to pay tax. So they will be liable for it but somehow HMRC won't be asking for it because that would be a huge administrative job anyway. Absolutely, absolutely. But then what happens, how do you feel if you're a nursery worker working two days a week to get a few pennies in, earning £13,000? So you're only just above the threshold.

And yet you're still paying tax. Yes, and people have made that point to me. Why should pensioners get this advantage and not very low-paid people, as you said? We must finish there. Heather, thanks very much. Heather Powell from Blick Rothenberg. And wages are the topic for Felicity Hanna.

Moneybox Live on Wednesday. Now, we all work for pay, but how does pay actually work? That's the question. From payslips that don't add up to asking for a rise. Send your questions or voice note to WhatsApp 033 06. or you can email moneybox at bbc.co.uk We do read and listen to them all.

Now, another big story for our listeners over the last few weeks has been the speculation about restricting the amount you can put into a cash ISA, the Tax-Free Individual Savings Account. The actual change announced on Wednesday by the Chancellor... wasn't as bad as many had feared. But from April 2027, that's more than a year away, the annual amount you can put into a tax-free cash ISA will be cut from £20,000 to £12,000 a year. That's annually. But...

and this will please a lot of listeners, that restriction will not apply to people aged 65 or more. They'll be able to carry on putting the whole 20,000 each year into a cash isa if they've got that much. money to spare. Our reporter Joe Krasner spoke to these people in Warrington about that.

It's just disheartening obviously as a younger person when you're trying to save up for a bigger house or deposits and things like that. It affects you moving forward doesn't it in life with everything I suppose. I thought the £20,000 to put in a cash ISA for pensioners was good because I don't want any risks.

most of us haven't got the money to actually put into ices you know 20 000 pounds a lot of money to all of us well it affects me because my husband's got two ices and i have and we're not over 65 yet so it really will affect us and how do you feel about that i'm very happy really because We've worked all our lives. I'm 59, he's 60. We feel we're losing out. I don't want to take risks with my money because I want it to be able to get to it. So I'll have to think about that.

Well, listening to that is Russ Mould. He's investment director at the investment platform A.J. Bell. Russ Mould, some people in Warrington worried about risk there. Do you think this £12,000 limit on cash for younger people will prompt more of them to put any money they've got above £12,000 into stocks and shares?

I can understand the gentleman arguing that this is a first-world problem for a lot of people, but there is no guarantee that that additional £8,000 goes into stocks and shares. They may look at other...

cash alternatives which are available to them, whether it's money market funds or premium bonds. There's no guarantee that the Chancellor's aim of driving money into the stock market to try and drive investment and try and help the economy. There's no guarantee that's going to work. And it does make the ISA... rules even more complicated than they were before.

Yes, and it's not just helping the economy, is it? Because the Chancellor was very clear in her speech that people would actually do better investing than keeping it in cash. So she thinks her plan will actually make people better off if they follow her, well, not advice, but guidance.

Yeah, I mean, the stock market does have its fallow periods, but certainly over the past few years, when interest rates have been extremely low, the stock market has definitely been a better option for savers, even if it does come with more risk and it does come with greater volatility.

danger of keeping your money in cash of course is inflation which represents a risk to you of a different kind yes though of course inflation affects investments as well you just hope they'll grow more rapidly than cash don't you um and This exemption for people aged 65 or more, I was just reading something that's coming on X. Maybe the 65 limit should be 55, says Greg on X, more in line with what work and private pensions offer.

couple of people in manchester say you know she'll be more like 60 do you think she's got it right that age of 65 I guess that at the moment fits with all the other existing rules. I suppose in that respect, there is an attempt to try and keep things simple, but there are lots of things still bubbling under there. Will you be able to move money around between stocks and shares and cash? The innovative finance ISA, will there be tests for...

cash eligibilities there are lots of things that are going to be put before parliament after a consultation before this new rule comes in in april 2027 yes and i must say there'll be millions of people who might be affected by it who's going to police it

That, I think, is going to have to be one for His Majesty's Treasury, because at the moment there are all these questions that have still got to be answered. So again, this comes back to the issue of... complexity and friction and barriers when really what the Chancellor should be looking to be doing is encourage people to save so perhaps they need less help they want to save further down the road.

And what does your firm, your firm, AJ Bell, of course, offers ISA products. What have your customers said? Do they see this as a positive move? And indeed, do you see it as a positive move, encouraging people to invest? I think encouraging people to invest is always a good thing, providing they're aware of the risks and it fits with their overall personal financial circumstances, needs and goals. But again, this issue of, you've now got...

three or four different types of ISAs with junior ISAs on top and more and more different versions, more and more different rules. That is a potential barrier to people getting involved, not a potential incentive. So we're not entirely convinced.

No, because it all used to be very simple, didn't it? There is a sense, though, that this has to go alongside better education. The Chancellor mentioned that specifically in her speech. And there's this new thing called targeted support, which means businesses like yours and banks can...

tell customers about investment opportunities. Do you think that will make a big difference, briefly? We'll certainly be trying to do our absolute best, as the old saying goes, if you think education's expensive, try ignorance. Yes indeed. And I suppose the final...

Word of advice, Russ, is if you've got enough money, use up your ISA allowances this year and next because you may not be able to do it. Definitely make the most of those. You have until April 2027, so make the most of the current rules, absolutely. Russ Mould from AJ Bell. Thanks. Thank you.

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The government has said it will review more than 200,000 bills owed by carers in overpaid benefit after they earned too much, sometimes in a single week, though the debts can amount to thousands of pounds. The news comes... The news comes as the government accepted almost all the recommendations of a new report into the plight of tens of thousands of unpaid carers who were often thrown into debt through no fault of their own. The review was written by Liz Sage.

who described the system as bewildering. And she discovered even the Department for Work and Pensions had got its own rules wrong. We'll be talking to Liz shortly, but Dan Whitworth has been reporting on this story on Moneybox from the beginning.

seems a big moment to me for carers and you've met many struggling with these debts haven't you? Yeah very much so Paul. Certainly many of the ones I've spoken to they've described this as a landmark report. It's 146 pages long and carers see it as a near complete Thank you. say, Paul, many of them have been pushed into debt by the Department for Work and Pensions.

the tune of thousands and thousands of pounds. Now, this was all because they'd unwittingly slipped over the amount of money they're able to earn before losing their carer's allowance, a carer's allowance worth £83 per week. That's something their entire... Thank you. Last year, Karina told me how a few hours of overtime at a local supermarket led her to owing £11,000 to the DWP. Money is taking well over a decade for her to pay off.

To be treated like I'm taking money that I don't deserve, it's heartbreaking. I can't go out and work any more hours. So I relied on that carer's allowance to give me a little bit extra money to give me that little bit of... a cushion and now it's taken away and now I'm too scared to reapply because I could reapply but I would always live in fear.

So, Dan, has this report given Carina new hope? Well, it makes 40 recommendations, Paul, the vast majority of which have been accepted by the government. And probably the biggest one for a lot of carers is the DWP committing to reassessing the... cases of 185,000 carers who are in debt and, in certain circumstances, reducing or clearing that debt. Now, Carers UK has described this move as unprecedented, a righting of a clear wrong.

And there's a big but attached to this, Paul. We know the total debt owed by carers is around £300 million, and the government has set aside £75 million to pay some of this off. So by no means is every carer in debt going to have that debt written off.

And when you spoke to carers, Dan, did you find they felt the way the system had worked treated them unfairly? Yes, very much so. And I think that's another really important element of this review. The DWP has accepted that unpaid... were let down by confusing rules between 2015 and 2025, with the government now committed to fixing those rules, something Karina, who, by the way, told me she's working her way through that report, said is crucial.

Well, I'm still ploughing my way through it and it is hopeful. It's hopeful for carers not to be dropped into this trap. it's complicated at the moment and it makes it a minefield you have to be an accountant in order to be able to work out what it is that you're allowed to earn what you can claim so Let's hope that they just make it so that it's easier, simpler, and people like me don't fall into that void.

Now, I have to say, we don't know what will happen in Karina's individual case, but DWP says most people will have their cases reassessed without needing to contact them. And the government finally said carers deserve a benefit that reflects their vital contribution to society. and that it's determined to fix problems with carers allowance that it inherited.

Thanks, Dan. Well, Liz Sace was the chief executive of Disability Rights UK, and she was the author of that report. She's with me in the London studio now. Liz Sace, in your report, you have a wonderful quote that says, the system for carers allow... and that cliff edge of earnings when you lose it was, quote, like playing a game where only the other side knows the rules. What issues did you find with the system? So the law says that your earnings can be average.

So you might earn a bit more one week and a bit less the other week because you're caring, so you're earning around your caring responsibilities. But the guidance that the staff were using... in the Department for Work and Pensions actually didn't comply with that law. And as a result of that, there were a lot of flawed decisions. We were told that almost never did this averaging happen. So people thought, it's OK, I've earned a bit...

Less last week or a bit more this week. But actually, they were then stung with an overpayment and sometimes a fine on top, which people said was just the last or an insult. So we all know that... Department of Work and Pensions benefit rules are often very complicated, but from what you're saying, the department itself didn't understand them, or at least didn't get it right. The regulations are very unclear, but the guidance really made this averaging of your earnings.

over a period of time vanishingly rare, which should not have happened. And that's why government are really pleased that government has said, while that... guidance was in operation, you know, those cases will be reassessed. The other problem was that the department was told, as I understand it, by HMRC... what people's earnings were, because it has all that data. But then it wasn't acting on it. It wasn't saying to Carer X or Carina, you know, you earned more.

You can't have the benefit that week. So is that going to be improved? Yes. So they decided only to look at a proportion of those coming through, the earnings data coming through from HMRC. But now they have cleared that back. backlog. And that should mean in future that there's no reason for these debts to build up to £10,000, £20,000. So let's hope that that's really going to make a big difference.

Yes, so that should be a problem solved for the future. And what about that rule that if you go over the earnings limit in one week or even correctly averaged, then your allowance is just stopped, isn't it? It's not stopped for that week, come back the next. Do you think that rule... age change.

Well, the long-term aim is that there should be a taper so that automatically, if you earn a little bit over, you'll get a little bit less carer's allowance. And that's how it works with universal credit. But at the moment, it doesn't work that way with carer's allowance. looking at how to do that. And I would just urge the government to get on with it because that would make a huge difference. And they are looking at it, but we don't want it in the long grass. I'm sure that...

Carers listening to this are thinking, well, am I going to get my debt paid off? Can you give any guidance who might get the debts reduced or written off and who won't? Well, the cases that are going to be reassessed are those that were affected by this averaging point. So if it was a different issue, it's unlikely.

I'm really keen that there is transparency about the criteria used in this reassessment because I think government's got a job here to rebuild trust with carers. You know, they've been let down. Let's make sure that everyone who's faced this injustice... now does get those debts written off. And briefly, when do you think carers will start to see real change?

Well, some things have happened already, like clearing this backlog and there's now a senior person overseeing an action plan. But some things will take longer. But I'm urging government to do this at pace. And in a word, you're confident this is going to happen? to happen? Yes, I think that the government has committed themselves to action, but we need to keep them to their word. Keep pressing them. Okay. Liz Sace, thank you very much indeed.

Now, the families of thousands of people who are infected with HIV and hepatitis C... by the NHS, when it used contaminated blood in the 1970s and 80s, will not have to pay inheritance tax on the compensation that many of them are still waiting for. That commitment came from Rachel Reeves in the budget. after Moneybox reported on a campaign to ensure those relatives weren't subject to inheritance tax bills of tens, even hundreds of thousands of pounds in some cases.

I will exempt all payments from the infected blood scheme from inheritance tax, regardless of the circumstances in which those payments are passed down. Well, Dan's still with us. Just remind us, Dan, why this was a problem in the first place. Well, when this Labour government came into power, it set aside £11.8 billion to make these compensation payments. Now, the issue was it promised victims and their loved ones these payments would not be subject to income tax or inheritance tax.

But because this process has taken decades to finally put right, many partners of people who have already died are now elderly themselves. So when they die, their children are facing large inheritance tax bills on those payments. Now, Rachel Reeves has now said that will not happen. Now, here's Owen McLaughlin, who we spoke to just a few weeks ago about this, whose dad Steve died in the 1980s after being given blood contaminated with HIV.

After years of what feels like years anyway of raising these concerns it's so encouraging to see that the government have finally recognised what could have been a massive injustice and doing something to fix it. So we're reserving a little bit of caution until we see how it works in practice. But for now, we're really pleased that our voices have been heard and there's a genuine relief across the community.

Owen McLaughlin ending Dan's report, and let's hope that problem is now solved. Lots of your emailing about... points about the tax that we mentioned. I can't go into them all now, but we'll be following some of them up in the future. But on that positive note about the infected blood scandal, we have run out of time. Back with more next week, of course. And remember, you can hear the programme.

first live on BBC Radio for Saturdays at midday. Meanwhile, tell us your money, worries or tips, budget related or otherwise. Email moneybox at bbc.co.uk or you can send a voice note or message by WhatsApp. on 033-06-783-183. We do read and listen to them all. In this podcast, the team was Dan Whitworth, Ima Devlin and Joe Krasner, studio manager Simon Kelsey, our editor... is Jess Quayle. I'm Paul Lewis and this was a BBC News money and work production for BBC Sounds.

I'm Shari Vahl and I've been investigating fraud for decades. Now I'm shining light on the secret techniques criminals use to steal your money. with insight from guest experts and the real people involved in these scams so you can see the fraudsters coming before it's too late. That's the new series of Scam Secrets. Listen now on BBC Sounds.

Customer journey isn't just changing. The journey is change. New ideas spread in an instant. Expectations rise overnight. Decisions are made in the blink of an eye. That's why companies need Sitecore. We put your brand in the moment, right when your customer is ready to act. So every message feels personal, timely, and makes your brand unforgettable. The journey is change.

Sitecore moves with it. See how at sitecore.com slash journey. Hear that? That's me with a lemonade in a rocker on my front porch. How did I get here? I invested to make my dream home home. Get where you're going with MDY, the original mid-cap ETF from State Street Investment Management. Getting there starts here.

Before investing, consider the fund's investment objectives, risks, charges, and expenses. Visit statestreet.com slash IM for a prospectus containing this and other information. Read it carefully. MDY is subject to risk similar to those of stocks. All ETFs are subject to risk, including possible loss of principal. Alps Distributors, Inc. Distributor.