Money Box Live: Autumn Budget 2025

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Hello, welcome to this Moneybox Live podcast budget special. These are my choices, the right choices for a fairer... a stronger and more secure britain there was an awful lot in the chancellor's speech it's been described as a pick and mix budget and as always with pick and mix that means we've only been able to take a handful so what we're going to do is focus on the big

And probably the biggest story of the budget for our personal finances is that Rachel Reeves says she will hold tax thresholds for a further three years, not two as had been talked about. Today I will maintain all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028.

Well, we looked at exactly this on Saturday's Moneybox. So the thresholds are the points at which you start paying tax or start paying the higher rates of tax. And they have been frozen since 2021. That means they've stayed the same while people's incomes...

have gone up, so more people pay more tax. And as the state pension rises, it could mean more pensioners will pay tax on any income above the personal allowance. Joining me today is Helen Thornley, tax expert from the Association of Taxation Technicians. which is a professional body for tax advisors. Helen, Rachel Reeves has continued the freeze for even longer than we expected.

Yes, we first had our personal allowance frozen in April 21, and she's now saying that it'll stay at just over 12,500 until April 2031, which is... Just a phenomenal length of time for it to not increase. Yeah, I mean, pretty much a decade where thresholds haven't gone up despite wages rising. Exactly. And it's been a very popular measure with recent chancellors because...

It's quite hard to see on your payslip. You can't see the increase in the same way you would if you'd put up an income tax rate. So it's a very subtle or arguably a stealth tax, you might say, as gradually over time, we'll all start to pay a larger... proportion of our income over in tax. Well we get a lot of questions about this. Carol from Chester has been in touch with a question on exactly that. I'm a single lady of 73, struggling more each year than this year especially.

I've no savings due to house and car repairs. I live in a tiny terraced house and my only benefit is single occupancy council tax. I get a state pension of £800 every four weeks. and a monthly pension of £450, and I pay £600 tax per annum. So I'm struggling because of the tax level remaining the same, being frozen for so long. I'd like to know how these changes to the tax threshold by freezing it yet again for many years is going to help me.

Carol, thank you for that. Helen, I suppose it's clearly not going to help, Carol, and it's going to affect a lot of workers and a lot of pensioners. But there was a specific mention of pensions and pensioners, wasn't there? Yes, so there is something, but sadly it won't benefit Carol because she's got her private pension.

But what we had was a very unexpected measure, throwaway remark in the speech where the Chancellor mentioned trying to protect particularly pensioners who just get the basic or new state pension with no additional increments. And aware that... Potentially, if their income goes over that frozen person allowance of £12,500, they might start to come into small amounts of tax. She suggested that from April 27 onwards, small amounts of tax due for those people might well be waived.

not got a lot of detail. What they've said is that there will be a consultation next year. OK, good to know. Thank you. Well, also joining our budget breakdown today is David Dodgson, partner at the Independent Financial Advisors, the private office. David, let's talk about Scotland because it's slightly different there, isn't it? It sets its own income tax thresholds and rates and it has a much wider...

wider range. So it's got a starter rate of 19%, a top rate of 48%, all based on different income thresholds. Could we see those thresholds or rates change in the Scottish budget, which happens in January now? It wouldn't surprise me, Felicity. The precedent has been set by Rachel Reeves today, so I would expect similar measures happening there, i.e. a freeze on those bans. And that is going to increase the tax take in Scotland. Certainly.

Thank you. Well, our final budget expert is Sarah Pennells, consumer finance specialist for Royal London, which is a mutual life and pensions company. And Sarah, more people might be paying these higher rates of income tax, but the Chancellor was really keen to point out she's not increasing the... Well, that's right. And she isn't doing that. But I think because it isn't so visible, you know, people may not realise quite how they're being...

caught by this extended freezing of the tax thresholds. But government figures, which are for the 2024-25 tax year, so they're the latest figures they publish. projected that there will be 6.3 million higher rate taxpayers. And it would be an increase of 42% compared to 2021. So I think, you know, in some ways you're thinking, well, what does it actually mean if the tax thresholds freeze? What does that mean for me? But I think those figures do illustrate. really well.

Actually, the impact on those people who currently are basic rate taxpayers, but who will end up paying higher rate tax. And as we heard earlier on, obviously, for people who have the state pension, who currently may not be paying tax as that state pension rises and the thresholds are frozen.

of them will start doing so or pay more tax. Okay. Well, probably the other most significant story for our personal finances today are changes to salary sacrifice for pension savings. Now, the tax breaks that a huge number of people get on their pension contributions, the amount they can pay in without having to pay national insurance has now been capped at £2,000. Sarah, I say has now been capped. It won't come into force till 2029. But just explain what it means and who will be affected.

Yes. Now, this can be quite confusing because, first of all, if you pay money into your pension, you get tax relief on your pension contributions. Now, those are not being affected by the changes to salary sacrifice. What's salary sacrifice, sometimes called salary exchange?

changes basically you can sacrifice you can give up some of your salary and in exchange your employer makes all the pension contributions on your behalf so you don't pay in your share of the pension contributions and it saves you national insurance and it saves the employer national insurance.

Now, at the moment, there is technically not really a limit on that, only the limits on what you can pay into your pension to get tax relief. From April 2029, as the Chancellor said in the budget, that will be capped at £2,000 a year. There are lots of people who are on a kind of average income or slightly higher than that who still won't be affected by salaries.

by this cap on salary sacrifice, it will start to affect people who earn £50,000 or more and people earning £75,000. It will have more of an effect. It is worth saying a couple of things. Firstly... Many employers don't offer salary sacrifice. Only around half, we think, estimate, probably do. And of those who offer it...

Only about half of those people who offered it take it up. So it will be a change. I think there will be some real confusion about it because we often get asked questions about, well, where's the tax relief? If I pay through salary sacrifice, what's happened to the tax relief?

you still do get it because your pension contributions come off your salary before tax. But I think there'll be many more questions before this is introduced, even though it's not coming in until April 2029. I feel like we'll cover it plenty on Moneybox and Moneybox.

Live before then. Lots of you getting in touch on this. Here's one. Hi, Moneybox Live. This is Peter from Sunny Margate. Following the budget announcement to limit salary sacrifice payments into pensions, which I believe is an excellent measure. as it gives unfair benefits to the wealthy. What I want to know is why wait to start this?

Well, there you go. Peter and Sonny Margate seems to be quite a fan. I suppose the government wants to give people a bit of a run up to it. Sarah, let's talk about bills, because there was the promise of a saving on energy bills for pretty much every household. What was announced? So, Rachel Reeves announced that there would be a £150 reduction in energy bills from April. Now, this will be done by removing some of the levies. So, it's the energy company, the eco obligations.

Most of the energy providers basically... pay this levy. Now, what the government has actually announced is that it's going to sort of scrap the whole energy company obligation scheme, which currently pays for sort of insulation for low income households. it will come up with another scheme which is funded through direct taxation. So I think there have been, as there have been a number of levies added onto people's energy bills over the years, and I think especially as wholesale energy can't...

Prices have started to come down, as they have been. There have been more sort of criticisms and questions about this. It is worth saying that for those people who qualify for the warm home discount, which is also slightly confusingly worth £150, they will get that on. top so that's mainly pensioners but not exclusively they will get 300 pounds off their energy bill but the warm home discount of course isn't a new scheme

OK, thank you. There was also some big news for cash ISAs in today's announcements. From April 2027, I will reform our ISA system, keeping the full £20,000 allowance. while designating 8,000 of it exclusively for investment, with over 65s retaining the full cash allowance. David, I mean, some people thought she was going to do this in the last budget, but it's happened in this one. What does it mean for savers? I think what it means is...

Essentially, people are going to have the opportunity to save more into stocks and shares than they can into cash within an ISA wrapper. It's clear that one of the, let's say, agenda items of the government is to encourage people to invest for the long term and gain better returns on their investments. And this is a means to achieve it.

The reduction in savings into cash ISAs will possibly not be that well received, and it certainly ignored what the Treasury Select Committee recommended, i.e. keep it at £20,000. But it will still be a relatively generous allowance, £12,000 per annum, that's £1,000 per month. It's still an effective way to save cash and avoid tax. It's also targeted in the sense that...

that people over the age of 65 will not be impacted, which is good news. Helen, why is that good news? Why might she have made that decision? I presume it's to do with needing more time, really, for investments. You don't want to invest in stocks and shares on a short-term time horizon. And I think that will provide some comfort for the over-65s if they're not comfortable putting it into a more high-risk environment.

still got the full benefit of the 20,000 cash allowance. Because they might be planning to withdraw it to live on in their retirement. OK, thank you. Let's hear from Ian now. He got in touch through Your Voice, your BBC News. Hi Moneybox Live. I retired earlier this year and I top up the income from my pension with regular withdrawals from my ISA.

which I was fortunate enough to be able to pay into for many years in preparation for retirement. The three dated objectives of the budget were cutting the cost of living, cutting NHS waiting lists and cutting government debt as a proportion of national income. How does reducing the amount that can be paid into an ISA per tax year contribute to any of that. Thanks a lot Ian. Sarah, what do you think?

Well, it's a really good question. I mean, I think we should say at the outset that the changes to the cash ISA limit were always sort of placed within the framework of being more about encouraging growth than sort of generating any sort of higher tax return. And in actual fact, if you want to put more money.

and not pay tax on the interest. If you're a basic rate taxpayer, you can earn up to £1,000 a year in interest and not pay tax. If you're a higher rate taxpayer, it's cut to £500. But even under the current interest rates, you can have quite a lot in savings.

savings and not pay tax. So I think this is really about, as the government has said previously, encouraging people to invest as part of the growth agenda. Now, whether it achieves that, because our research shows the main reason people don't invest is because they think they don't. have enough money or they don't understand how stocks and shares or stocks and shares ISAs work but it feels like obviously that's what it's designed to achieve probably possibly not

directly addressing the issues of cost of living and investing in the NHS. But if it does spark more growth, then obviously that would be good for the UK economy generally. And one thing I think it's really just important to flag up is this is a change to how you can save...

It doesn't change the tax-free status of the money you've already got maybe in a cash ISA or that kind of place. OK, well, we had this news yesterday, but Rachel Reeves confirmed a rise in the living and minimum wages from April. So a bit of a pay rise. The hourly rate for over 21s will go up. 50 pence to £12.71 workers aged 18 to 20 they get an 85p rise to £10.85 and under 18s and apprentices will get 45 pence more so it's £8 an hour Sarah briefly

This is the kind of change that can make a real difference to people's pay packets. Yes, it really can. And we've seen that with the sort of rises we had. that came into effect this April as well, as you mentioned. And it can have a really beneficial effect. And we know we've had the cost of living crisis and, again, ongoing high bills. And for those people who are starting out their working lives... on the living wage, then this does make a...

big difference. Now there has been some concern about the fact this is having an inflationary effect but kind of taking a step back from it in a way that's what it's designed to do. It is designed to not just increase the wages for those at the lowest levels but those who are paid you know higher wages so maybe sort of graduates for example obviously I think businesses will say that these increases may not be the most welcome bearing in mind they've had other costs to bear but

The whole point of increasing the national living wage is actually so it does have that filter effect on other wages as well over the longer term. Some businesses have warned that it might mean that they hire fewer people. But yes, a pay rise for a lot of people. The 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.

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Right, let's just talk. quickly about stamp duty because the speculation there began way back in the summer many people thought or suggested it might be scrapped it might be completely reformed today now remember this is a tax paid by most home buyers in england and north Scotland and Wales have slightly different levees. It didn't come up at all. There was no announcement on stamp duty in that speech.

There was an announcement on a mansion tax. So properties worth over £2 million are set to be hit with a surcharge of between £2,500 and £7,500 from 2028. Right. Helen, there was an increase in national insurance on property, dividend and savings income. Just explain what that might mean to our listeners.

Yeah, so there's more taxes here on those investors. It's actually quite complicated because she's phasing it in. What she suggested is from April 26, there'll be an increase on the tax rate on dividends by 2%. This is the income tax rate. basic and higher rates. Surprisingly, the additional rate for those earning over £125,000 isn't increased.

And then from April 27, she's adding 2% onto savings interest and property taxes. So the rates would be 22%, 42% and 47%. So that's interesting because of the timing. The gentleman before talking about, well, how will... reducing savings into ISAs increased tax. Well, there's a little bit of a combination that as the under 65s can put less into a cash ISA, they will also be paying a little bit more tax if they've got taxable savings interest because that rate

going up at the same time. David, will you be getting phone calls from clients wanting to understand what this means for them? I've already had them, Felicity. And yes, it's a source of concern. And what I would say as well is it's, I don't know, perhaps a call to action because the fact of the matter is if...

saving, be it in cash or be it in investments, if the cost of that from a tax perspective is increasing, you've got to start using your tax allowances as much as possible. Make sure you fully fund your ISAs. Also, think about funding your pension as well, because although there are some very negative aspects in terms of salary sacrifice, the fact of the matter is, as Sarah was explaining, there is still the ability to achieve income tax relief on the country. contributions that you make.

Please, let's say, don't be deterred from taking advantage of saving and investing by some of the negativity. There is still some very attractive tax breaks to take advantage of. OK, good advice. Thank you.

thing that was confirmed is that the two-child benefit limit has been lifted. I can announce today, fully costed and fully funded, the removal of the two-child limit in full. Now, a quick reminder, this cap has meant that parents can only claim universal credit or tax credits for their first two children, although the Scottish government had already announced it was going to offset the impact and effectively scrap the cap from March next year.

Sarah, this is another thing that could make a huge difference to some households. Yes, I think a number of organisations have said that this could be the biggest move to lift children out of poverty, lifting estimators of anything between 500 and 60. 650,000 children out of poverty and as you say being scrapped from April and what it did mean because it's introduced in

April 2017. So for any parents who had children born after April 2017, they couldn't claim the child element of universal credit or tax credits, which is worth about £293 a month. So it's quite a... significant amount they couldn't change it claim it for any child after those two children and of course you know some people will have had

three children and then their circumstances will have changed and then they end up claiming benefits. So I think it is a move that will make quite a big difference to those people who find themselves claiming benefits, whether that's in work or out of work, who have more. and two children who were born since April 2017 who are currently missing out on that.

£293, almost £300 a month. It's not the only cap, though, is it? We've had an email from Pam who says, I'm very relieved that all children are to be eligible for benefits. I'm not clear whether the overall benefit cap is also being raised or removed. If not, will there still be a significant reduction in child poverty? So Sarah, just explain, because there is this overall benefit cap that still is in play.

Yes. So separate, it's all very confusing. I think the terminology is very confusing. So separately, there is an overall benefits cap, which is the amount that you can claim per year in benefits. And it's different if you live in London. It's slightly lower if you live outside, but it's kind of basic. in the sort of mid-20,000s. Now, my understanding from having looked at all the budget documentation is this is not being changed. So although the abolition of the...

Limit the two child limit for claiming benefits is welcome because it means there's access directly to that child element if you are claiming benefits and your total is more than the overall benefits cap, then you won't be any better off. So it definitely will help some people. I think some organisations and charities may well say it's not going far enough.

Thank you very much. Right. Should we do some quick fire tax changes? A bit like a sort of budget game show. Helen, what about the fuel duty freeze? Yes. So that's a rising one, but it's going to be frozen until September 28th. 26, so no further increases in fuel duty for another more or less a year. Okay, but we did have some news about electric vehicles, didn't we, Helen? Yeah, so that's a little bit more confusing. Potentially from April 28, we'll have a new annual electric vehicle.

called excise duty it'll be an annual charge but it'll be based on your mileage so there's going to be a consultation on how that will work but the estimated costs are going to be three pence per mile so that electric car drivers are contributing to the upkeep of britain's Thank you. David, there were quite significant changes for gambling as well.

There was indeed. The new SYN taxes. Online gaming levy increased from 21% to 40%. And also the levy on online sports betting increased from 15% to 25%. But the bingo duty was abolished, which will please my mum. Well, it's good to know, David's mum, one of the budget winners today. I also, I want to flag that the Chancellor has exempted all compensation payments from the infected blood scheme.

from inheritance tax. And this does feel like a bit of a money box win because Dan Whitworth has reported at length into how children inheriting parents' compensation did stand to be hit with inheritance tax. And that meant tax bills...

costing hundreds of thousands of pounds. So I'm sure Dan will have more on that in Saturday's programme. Let's hear something else. Karen has been in touch to say this. So I'm Karen. I'm a single mum to an adopted daughter. I'm an IT recruitment consultant, but also have a side business who does kids' quick-drying onesies. So things are quite difficult at the moment with grocery prices going up every... week I'm the sole earner in our family so everything is relied upon my wage so I have

A main job, but I'm really hoping that my business will give me an income at some stage. So having listened to the budget, can you tell me, will people have less money in their pockets to be able to buy products like mine? Karen, thank you very much. Sarah, that is a very big question. Give it a go. Will people have more or less to spend on Karen's stuff? Well, I wish I could give a very specific answer to Karen.

Basically, this budget is not as bad as it could have been in that although their income tax thresholds are being frozen and frozen for longer, there were some other changes that...

could have been introduced that I think would have affected people more. And also they are getting some money off their energy bills. So it depends on whether they want to go and spend all that money in Karen's shop. But I think definitely things are not looking as bleak as they could have been and could even be looking a little bit brighter for Karen.

I mean, that's pretty optimistic. Helen, we're getting quite a few emails in from people who want to understand how tax would be taken on state pension if they end up kind of moving into the threshold and if the exemptions don't quite... come into force for them? How do people pay tax on that?

Well, the way that HMRC collected is through a system called simple assessment. So it's the opposite of self-assessment. Self-assessment, you fill in the tax return, you tell HMRC what your income is. In simple assessment, HMRC says, well, look, I've got this information. from your pension provider, from your employer, from your bank. I think this is the tax you need to pay. So we'll see increasingly more pensioners moving into simple assessment.

The problem with simple assessment is it can land any time between 6 to 12 months after the end of the tax year, so it can be quite a surprising and unwelcome tax bill if people aren't ready for it. And it's also really important to check all the figures because HMRC may not necessarily have all the right information on you. So make sure you recognise the figures that are on there, that what they've got as your pension income was, your saving income, looks like what you're expecting them to.

to know about. Thank you very much. David, I know there's a lot, a lot to get your head around in a very short period of time, but Norma has emailed to ask about the seven-year gifting rule, whether there are any changes to that and any changes to inheritance tax. David, are you there? Yes, I am. Yes. Can you hear the question? Any announcements on inheritance tax and that seven-year gifting rule? Seven-year gifting rule.

No change, which is a relief to everybody because we suspected that it might actually be extended out to 10 years, which would make life a little bit more difficult for people looking to pass assets through to the next generation. So that is good news. There was something around agricultural property release.

agricultural property relief and business property relief. So this is basically farmer's inheritance tax. Absolutely, that's right. And the ability to pass the allowance on to a spouse post-death. Now, the technicalities of that and the specific...

Specifics on that I'm not too clear on at the moment, but that was certainly something that's positive that we'll be digging down to in a little bit more detail, Felicity. Sometimes it does take a little while, doesn't it, to really analyse the detail. OK, we've covered a huge amount of what...

was in the budget. I thought I'd finish then by asking each of you for either something we've not covered that you think listeners should be aware of or something that they ought to do right now to protect their finances. Sarah. Well, I suppose the change is to the pension protection fund. So it means that basically this protects people in final salary pensions where their employer's gone bust and there's a deficit in the scheme. And the change means that...

Pensions built up before 1997 will be uprated by inflation. Good to know. Helen, we're really, really short on time. What's yours? Just a practical point that the government is looking to try and make it easier for those in self-assessment to pay tax. And there's a suggestion they might let you pay in instalments rather than wrestle with the difficult payments on account schemes. So given we've all got all this extra tax to pay, I think...

That could be very welcome. So hopefully sooner rather than later. Thank you very much, David. 10 seconds. More time spent educating younger people in terms of personal finance. That's always good advice. We love that here at Moneybox Live. Well, we don't get as long to talk as the Chancellor does. So that's it for this Moneybox Live podcast. Huge thanks to our experts, Helen Thornley from the Association of Taxation Technicians, David Dodgson from the...

private office and Sarah Pennells from Royal London. Remember, The real story of the budget does often take a few days to work out. So don't miss the Moneybox podcast on Saturday afternoon. Paul Lewis will be opening his briefcase and digging deeper. Please let us know if you've got a comment or a question for him.

him about what the Chancellor announced today and here's Karen to tell you how. You can email moneybox at bbc.co.uk or send the team a message or voice note on WhatsApp. The number is 0306 783 183 They really do read and listen to every message.

We really do. Thanks, Karen. In this podcast, the producers were Sarah Rogers and Helen Ledwick. The studio manager was James West, the production coordinator, Ima Devlin. Our editor is Jess Quayle. I'm Felicity Hanna. And this was a BBC News money and work production for BBC. After Anthony Easton's father passes away, he goes through his dad's old suitcase. It's filled with cryptic clues. Neatly stacked German money. A family tree he doesn't recognise.

and also finds his father's birth certificate, but bearing a different name. From BBC Radio 4 and the History Podcast, I'm Charlie Northcote, and I've been working with Anthony Easton... to understand his family's dark history and how they lost a fortune worth billions today. What happened to his family, their business empire, and all the money? Listen to the house at number 48. On BBC Sounds. The customer journey isn't just changing. The journey is change. ... ... ... ... ...

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.