Money Box Live: Budget Special

This BBC podcast is supported by ads outside the UK.

Hello. Well, after weeks of speculation, this Moneybox Live podcast can finally ditch the budget rumours and deal with the facts. The Chancellor, Jeremy Hunt, has opened the famous, or maybe infamous, red briefcase and set out the government's spending plans. Now, this is almost certainly an election year, making this an incredibly political budget. But here at the Moneybox Live podcast...

we are focusing on what the announcements mean for your finances. Here's what the Chancellor had to say to working taxpayers. From April the 6th, employee national insurance will be cut by another 2p. And for some parents? I confirm that from this April, the high-income child benefit charge threshold will be raised from £50,000 to £60,000. And for those really struggling with the cost of living, an extension of the household support fund. Now is not the time to stop the targeted help it offers.

We will therefore continue it at current levels for another six months. Well, that's just a few clips. He spoke for more than an hour. So what does what he said mean for your money? Now, before we unpack the Chancellor's briefcase full of announcements, how are people feeling?

And what did they want him to prioritise? Well, ahead of the speech, I went out to the award-winning Warrington market to ask traders and shoppers there how their finances are faring. And I started off at a butcher's. I've got sausage, bacon, chops. Cook meats, ribs, bacon and all that sort of stuff. Do you eat a lot of pork? Not really, no.

And can I ask, how are you feeling at the moment about your finances, about the cost of living? Do you think it's easing up? No, I don't. I think it's getting worse. And I think it's going to get worse before it gets better. I think everyone's struggling. especially with food i live on my own i'm a single parent and it's really sort of tough trying to sort of keep my head above water at the minute and it i'm fighting a losing battle

There's a lot of my wages go towards tax. And so, yeah, tax is major. I'm selling Irish white puddings, black puddings, best bacon, bacon chops, then some cracking pies that everybody loves. And how's business? Are your customers, do they have as much to spend as they used to? No, that is the trouble. They're all watching what they're spending now and very worried by the finances.

So what would you like the Chancellor to do? What would help your finances? I don't think he's got a lot of room to help me. It worries me that he's going to drop the insurance down by that. What point is that to anybody? What we need to do is get this country's finances in straight and then give some stable chance for business to increase and feel as though they can increase. We haven't got any finances, we just haven't got any money.

Some of the traders and shoppers at Warrington Market there. Well, with me today to take a look at the budget and explain all are Sarah Coles, who's Head of Personal Finance at Hargreaves Lansdowne, Simon Gammon, Managing Partner at the mortgage broker Knight Frank Finance,

And Dawn Register, who's tax partner at the accountancy firm BDO. Good afternoon. Good afternoon. Hello. There you go. An enthusiastic budget day. Good afternoon. Sarah, did anything surprise you in the budget? Well, an awful lot of it had been trailed. So obviously the big hit was that 2p cut to national insurance, which you did know about in advance.

I think the thing that came sort of out of left field was this British savings bond, which we don't have a lot of details on it just yet. But it looks like a sort of three year fixed rate bond. So, yeah, we'll have to keep our fingers crossed for a decent rate. But it is something that's brand new in the market. Simon, what about you?

Were you perhaps expecting more or did anything come out of the left field for you? I think, like I say, no huge surprises. I think maybe the capital gains reduction on second homes being sold was a bit of a surprise. But time will tell to see whether that actually motivates people to bring property to the market. And we'll talk more about that as well in just a minute. Dawn, what about you?

The VAT threshold for businesses to register for that, increasing from 85,000 to 90,000, wasn't pre-released. And that is the first increase in seven years. So I think that will be well. welcomed although it's a small tweak it does make a difference

Thank you very much. Right. Let's talk about that national insurance change, because there were lots of calls, lots of rumours of different kinds of tax cuts. What's actually been announced is that two pence cut in national insurance. And that's the second time Jeremy Hunt. has cut it. Moneybox reporter Dan Whitworth is here in the studio, can talk us through the detail. Dan, maybe start by telling us a little bit about national insurance.

Okay, Fliss, so I've printed out a fairly stereotypical payslip. I've got it here. Now, the big number in the bottom right is what most people go straight to look at. I do. That's how much you get, as do I. That's how much you get in your pocket or more likely gets transferred into your bank account.

called deductions well that's a painful one that people check out too how much money is taken out of your pay so things like income tax student loan payments or pension contributions if you have them and of course national insurance Now, as you say, Fliss, those national insurance contributions are going to go down by two pence in every pound you earn, saving the average worker £450 a year. But this new cut is in addition to the exact same cut the Chancellor...

announced in the autumn, so £900 in total. OK, but that's not the only tax coming out of our payslips, so we'll talk about income tax in just a moment. First of all, though, Dan, what about if you're self-employed? OK, so that's slightly different. As from April, the Chancellor said 2 million self-employed people will pay 6% on their profits between £12,571 and £50,270.

That's down from 8%. They also won't pay Class 2 contributions. The government calculates total savings will be £650 for self-employed people. Dan, thank you very much. Let's just hear from Rachel, who works as an administrator for her husband's company. She thinks January's reduction in national insurance didn't really make a difference to her finances.

Well, about £10 a month, if that, so hardly worth it. Whether it should have happened, I don't know. I think people were managing with it as it was before, so the actual benefit to me wasn't that much, but the benefit to the nation would have been better, I think. Right, Dawn.

As Dan was saying, if you take the two cuts together from the autumn statement and from this budget, and I'm very sure that's what the Chancellor is hoping people will do, the average saving is about £900. But the higher your income, the greater the saving. Correct, and this only applies to those who are subjected to national insurance, so those who are below the state pension age. It also only applies to workers, so employees and self-employed individuals.

really doesn't negate, which I think is the person who was just talking there about they haven't noticed it in their pocket, it does not negate fiscal drag, which is income tax rates have remained the same. And in particular, the personal allowance, so the £12,570 that everyone can earn tax-free, has remained frozen since 2021 and still remains frozen. And that has a massive impact. We'll talk about that.

in just a moment. But a lot of people getting in touch on that question of who benefits and the fact that if you're above state pension aid, you don't. Nick has emailed to say, do the 66 and over working population gain anything from the 2p cut in national insurance?

It doesn't sound like it to me. And he's put an eye rolling emoji. Liz says, so the cut in national insurance is to encourage people into work and reward work. Nothing for those of us who work past retirement because we have to or we choose to. Dawn, thank you.

Let's talk then about that other key tax, income tax. And as Dawn's saying, the thresholds for that have been frozen since 2021. Here's Darren. Now, he works for the NHS. He says he pays too much tax. And in fact, he's recently started paying more into his pension.

to move himself down a band from the highest to the middle. There's no incentive to go to that next level because you just want to get taxed and you're working for effectively nothing. No incentive for me personally to go up to the next sort of grade. It's after tax. And the responsibilities doesn't work out. Sarah, so Darren there saying there's no incentive to earn more. Dawn's mentioned fiscal drag. Can you just explain it to us? Because we know the personal allowance threshold and tax bans.

The current plan is that they will be frozen until 2028. What impact does that have? Yeah, so it doesn't have any impact sort of immediately. The problem comes when people get pay rises. So obviously, we've had such high inflation that people actually been getting more pay rises. And as your pay goes up, because those thresholds are sort of held steady, you go over the thresholds.

So it means more people paying more tax and more people paying a higher rate of tax. So when I say more, there's about 2 million people who are affected by this. One of the things that is worth bearing in mind, so because... your benefit from the cuts in national insurance will depend on what you earn. It actually means that lower earners...

once you sort of factor in this fiscal drag idea and the national insurance cut, lower earners are actually worse off than they would have been if none of it had happened. So it's anyone earning less than £19,000 actually ends up worse off. Whereas if you take someone who's earning sort of...

£50,000, they're actually £1,200 better off. So massive difference between higher owners and lower owners. And from the people you were chatting to in the markets, it's those people on those low incomes who are really struggling right now. What's interesting is you sort of think of fiscal drag as people being dragged into those higher tax bands. But the Office for Budget Responsibility says that by 2028 to 2029, fiscal drag will have brought 3.7 million more people into...

paying tax. So Sarah, just paying tax in the first place. Yes. And the other thing to remember is it doesn't just affect your income tax ban. So if you go into, for example, a higher rate tax ban, you will then pay more tax on your savings. You'll pay more tax on any profits that you make from things like investing or for things like selling a second profit.

property so it affects you right across the board if you sort of move into a higher tax bracket and yes as you say you know there's an awful lot of people who are on pensions at the moment on relatively small private pensions when added to the state pension are now paying tax because this sort of personal allowance

So if you look at these two things together, the national insurance and the fiscal drag issue, the Resolution Foundation suggests that there's going to be about £20 billion of tax cuts through national insurance rates, but about £35 billion of tax...

Right, another big change announced today was a rise in the high income child benefit charge threshold. This is... essentially the point at which a family begins to lose child benefit if even one parent earns above that. That had been set at £50,000 since it was first introduced. So if a parent earns more than that, it begins to taper off.

It's meant that more than a quarter of families with children have lost some or all of their child benefit. That's according to the Institute for Fiscal Studies. Big change in that today. That's going to rise. Yes, I mean, this is welcome. So we've got some short-term increases to the threshold, but we've actually got a commitment to reform the whole charge and the way it works.

by April 2026 and we don't have the detail on that and we hope there's a consultation on that so people can put forward their views. But yes, the threshold increased to £60,000 and also that phasing out period. So you now don't lose the benefit until you reach £80,000. So both those numbers increase today and that is welcome. So a slower taper. Yeah, exactly.

Exactly. Sean's emailed about this and he says, just contacting you regarding the high earnings tax charge. For once, my prayers have been answered. I've been praying for there to be a change to this tax charge. And Dawn, that other change you mentioned, the promise.

to consult and to change the system. This is to address that unfairness where a single high earner means the family loses the benefit. But if two parents, for example, were both earning just below 50 grand each, that family would keep it. Correct. And it's going to be quite hard for HMRC to administer this because we do have the principle of independent taxation. But of course, they actually need to collect household data and how they do that might be quite a challenge.

this was not a means tested benefit at all. Everyone received child benefits. So I'm sure it will open up the whole debate about how... we distribute this money and to ensure it's fair. But any effort to address this unfairness is welcome. So that is something aimed at what the government would describe as middle-income families. There were in today's budget a number of announcements aimed at people in the most vulnerable.

financial positions. So scrapping the £90 fee for debt relief orders, extending the household support fund for another six months, that's money that helps councils provide support to. Food banks, warm banks, food vouchers, that kind of thing. Sarah, those are important changes. There was also, though, a change for the one million households on universal credit who take out advances to help them pay for big, perhaps unexpected costs. repairs or moving, what's changing?

Yeah, so the idea is that if you have one of these big one-off costs, you can apply in order to have your universal credit early. So you sort of apply for an advance. Now, at the moment, you have to pay that back over 12 months. And the plan is to stretch that further. So you have 24 months to pay it back. And that really means that it takes the pressure off people when they're trying to pay it back. It is worth putting that in a tiny bit of context in that...

Actually, at this point, we've just had the last of those cost of living payments that households have been getting. So a lot of people have been sort of relying on those to sort of help bump up those one-off costs. So hopefully this will sort of help ease things slightly, but it's definitely...

not as generous as sort of giving them a £300 lump sum, which is what we've had in previous years. Now, we've had some reaction to this from those who support people in debt. Let's hear from Richard Lane, who's from the charity Step Change. We think that's going to be really important so that households can pay at a more affordable rate when they're making those repayments on those advances.

But we still do worry that many households are facing deductions to their universal credit if they've got things like historic government debts that they might owe, which often pushes households into real hardship. We've also seen today an announcement that the £90 application fee for debt relief orders is going to be scrapped and we really welcome that. We know that having to make that payment before you can access a really important debt solution like a debt relief

order can be a real barrier to people taking out debt advice or going on to a debt solution. We also know that there are charities across the country who are having to find the money to pay for those fees. So that's a really big and important step forward.

for people who might need a debt relief order. Well, that was Richard Lane from Step Change. Dawn, we've been talking about fiscal drag and its impact on people who are earning an income, paying income tax. Dave has been in touch. He's emailed moneybox at bbc.co.uk to say, due to fiscal drag, I now pay tax on my state pension. Crazy. I mean, as that rises and the bans remain frozen, that does affect people who've retired.

Absolutely. And it affects people with rising with the increases in interest rates. It affects savers as well. And of course, as Sarah mentioned. State pensions and other pensions have increased with inflationary pressures and the tax rates have not. kept pace and we would like to see an increase in the personal allowance. That would make a big difference to those people who for example earn less than £19,000 state pension plus maybe a private pension.

Right. Simon, you've been waiting patiently and there have been a few important changes for housing, haven't there? Let's start off with a change to capital gains tax. There's going to be a change to the higher rate of property capital gains tax. Explain that to us. So, yes. Sorry, the change for the second home is being sold, or was this...?

So this is, isn't it, tell us about the changes, unpack them. Well, I think what we've got is a number of things that have come up today for the property market. First of all is the capital gains tax on second homes being sold, which was a surprise. Because you only pay capital gains. tax on a property that isn't your home. That's right.

Correct, and isn't your main home. And if you're selling a second home, and I think where the Chancellor's coming with this one is if he's trying to encourage people who've perhaps been hesitant to sell a second property to bring it to the market by giving them less capital gains tax to pay. And then, of course, he's been... making a lot of changes around further furnished holiday lex and he's mentioned

Some changes to stamp duty as well. Okay. Well, that higher rate of property gains tax, that's going to fall, isn't it, from 28% to 24%. Correct. So significant potential changes there. And then some stamp duty relief for people buying.

more than one dwelling is being abolished. I think a lot of people listening wouldn't know that that kind of stamp duty relief had even existed. Can you explain what the rules were before today? Sure, of course. So basically, if you were buying six or more properties, there was...

relief on stamp duty and it really only affected those who were very very wealthy people buying often new homes in bulk and so it's really a closing of a loophole rather than a great saving for anybody and it's unlikely to get any cheers from first-time buyers.

I suppose. It was a mention that it was being abused, I think. One thing that first-time buyers might have been hoping for that had been kind of discussed in the press ahead of today was this idea of 99% mortgages. And there were rumours that the Chancellor was... Considering that, that it would help would-be first-time buyers who had very small deposits. But it wasn't in the statement, in the budget. And there was a lot of industry concern over the plan.

That's right, yeah. The government is obviously keen to do anything that seems to be helping first-time buyers. However, in order to run these schemes, you really need lenders to join forces with you. And those sort of loan-to-values, 99% mortgages, even with government guarantees, there just wasn't the appetite from the lending community. And so it was canned for now. However, I would suspect that it won't be the last time we hear about first-time buyers before the election.

And Sarah, I mean, there is still some help for first-time buyers, isn't there? Some existing help through the lifetime ISA. Yeah, so the lifetime ISA is somewhere that you've got an allowance of £4,000 a year. And if you put £4,000 in, it gets topped up by the government to £1,000. And you can spend that on...

buying a first property, or you can hang on to it and use it for retirement. And we were actually hoping to see a change to that in the announcement today. You know, we were hoping to see that basically if you... use it for any other reason than those two specific things, buying a house or retiring. You currently pay a penalty of 25%, which doesn't just take away the government bonus, it takes away some of your money as well.

to see that change, we're expecting to see that drop to 20%, which would help a lot of people, but it would also help first-time buyers who wanted to buy a slightly more expensive property than the scheme allows. So if they wanted to buy something that costs more than £450,000...

moment they have to pay the penalty and the hope was that that penalty for buying a slightly more expensive property would then drop we didn't see any mention of it at all in the in the budget and it's there's nothing in the supporting documents either so unfortunately we were

expecting it and it just didn't happen. So for anyone who doesn't have a lifetime, I'd say these are the tax-free savings or investment accounts. They're aimed at adults under 40. Well, you can open them if you're under 40. You can save up to £4,000 a year and get a government top-up of 25%.

So a maximum of £1,000 a year. And as you say, Sarah, no change. And we've had an email from Elaine about that. She says, so disappointed that he didn't change the Lisa, the Lysa, to stop penalising first-time buyers who lose more of their savings. when they cash it in, purely because they cannot find a home to buy it for less than £450,000.

OK, there was, though, some significant changes for savers. There were some changes for savers, weren't there, Sarah? You are allowed to save up to £20,000 a year into an ISA, into a normal ISA. that's going to rise for certain investments through a British ISA.

Yes. So at the moment, we're all in a consultation stage with this. So there's nothing happening overnight. There's nothing to get excited about just yet. So basically, the plan is to introduce this extra £5,000 allowance specifically for investing in British companies. in what's sort of been called the British ISA. Now, there's a huge amount to be ironed out about how that works and to make sure that it actually does help encourage more people to invest in the UK without actually damaging.

And one of the problems with it is whether it's going to end up overly focusing their investments in one place. So there's quite a lot to be ironed out. But overall, if it does come in, it will mean this extra £5,000 that you can put into an ISA, which has to be a good thing. We'll have to wait for the details to know exactly how it'll work. So that's the British ISA. Also news about a new British savings bond. Yeah, so this is...

It was the thing that came out of the blue for us anyway, that the National Savings Investments are going to launch a three-year bond. At the moment, we don't know what rate it's going to pay, and an awful lot will depend on the rate. So we saw from when they launched this exciting new green bond that when the rate on that was discounted, disappointing. It didn't attract a lot of attention. Now, one of the problems is three-year rates at the moment are actually quite...

poor compared to shorter term fixes. So we might not get much excitement around that rate when it comes out. But the idea is that obviously that you're putting money aside in this British savings bond in order to raise finance for the government to spend on British projects. So we'll have to wait to find out what the rate is and how that's actually going to work in terms of funding. But it is hopefully another source of finance for British companies who are trying to grow.

I'm a pensioner with a part-time job I don't pay national insurance but I do pay income tax keep your thoughts coming moneybox at bbc.co.uk right Simon you've mentioned it let's dig into it the budget included Pretty significant change to anybody who rents out a holiday home. They currently get extra tax relief compared to private rentals. What is it that's changing?

Well, it's a well-documented change. So if you own a property that you let out for holidays, you have been able to register it as a business. And as a business, you could offset a number of expenses against the income that you generated. to lower your tax bill. So for example, mortgage interest, if you bought furniture, etc.

And you could have benefited from lower capital gains tax. And by claiming small business rate relief, you may have been able to not pay council tax as well. And that's all been abolished today. The Chancellor said this will help local housing markets, which it may to some extent.

but I think the bigger national housing shortages is probably the bigger picture there, and that's the only true fix. If you own a holiday let, I think getting some good advice now is key, and you may wish to consider letting your property now for longer-term lets, even perhaps to local people.

OK. And is this, do you think, going to make a difference to the number of homes that are just available on the market for people to rent to live in, which particularly in these holiday hotspots can be such a problem? I think it's a positive change locally, but I'm afraid I don't believe it's going to be the silver bullet. It's going to help perhaps some existing second home owners. look as i said to the longer term lets and that could be done locally to local people but um

I think the housing shortage is the major issue and still that remains unsolved. And Dawn, this change is expected to raise something like £300 million a year, so it does sound like it'll be quite expensive for anyone who's affected. Absolutely. I think the point is that if you're a landlord, the tax relief, as Simon mentioned, have diminished over the years in terms of what you can deduct for tax purposes.

and if you're a landlord earning £30,000 a year, then you would currently save £4,000. Now that's going to be abolished. So it does make it more expensive to be a landlord. Thank you. Right, let's talk about what are sometimes called sin taxes, alcohol, cigarettes, vaping now apparently. Dawn, there was a pretty big change for vapes. Yes, this was widely predicted that there will be a due...

a new duty on vaping from the 1st of October, 2026. So quite a long run in actually, which was quite surprising. And also... duty on cigarettes will increase as well. So clearly trying to drive behaviour there and also link to the environment, there will be an increase in air passenger duty on business class flights.

Now, what was quite interesting was that fuel duty didn't rise as planned. I mean, I say it's interesting. It never rises as planned, does it? It's been frozen every year since 2011. It was actually cut by an extra 5p in 2022. That was only meant to be temporary, but it was extended last year. And Dawn, now we know it's extended again. It will be a big relief, though, for a lot of motorists. I think so. This is kind of positive money in the pocket. The average...

that owner of a car will save about £50 next year as a result of this. As you say, it hasn't increased for 13 years, so it would have been very unpopular to do that, particularly in an election year.

And in a sentence, Dawn, do you think there was anything missing from the budget? For me, there were... There wasn't many resources for HMRC and for many people with their tax bills, they are struggling. There was £140 million promised for debt management, but that is really a drop in the ocean and service levels remain. an all-time low according to the Public Accounts Committee. So we would have liked to have seen more resources for HMRC.

Well, that is all we have time for in this Moneybox Live podcast, meaning that we took 35 minutes less than the Chancellor himself. Admittedly, we weren't being interrupted by shouting MPs. Huge thanks to everybody who took part in the programme. And thank you, of course, to our experts.

We've been hearing from Sarah Coles from Hargreaves Lansdowne, Dawn Register from BDO and Simon Gammon from Knight Frank Finance. If you have any questions or comments on the budget or any financial story you'd like us to take In this podcast, the producer was Craig Henderson and Kath Patterson. Production coordinator Sandra Hardiel, studio manager Matthew Dempsey. Our editor is Sarah Rogers. I'm Felicity Hanna and this was a BBC News Money and Work production.

Hello, I'm David Yelland. And I'm Simon Lewis. We're the hosts of Radio 4's When It Hits the Fan, the podcast which looks at how big names and big companies manage their PR. But what about your own personal PR? How do you better manage your own reputation at work? We're here to help. With a series of special bonus episodes, we'll bring a little wisdom and share some tips to hopefully make you better at that job.

Quick Wins is a series of short and snappy episodes with lots of advice aimed at improving your working life. If that sounds useful, then please listen and subscribe on BBC Sounds. Just search for When It Hits The Fan. A Vivint home is a smarter home. Vivint lets you keep an eye on your kids from anywhere, so it's a smarter way to care. Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save.

When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4-VIVINT. Live intelligently.