This years UK Budget presented by Chancellor Jeremy Hunt was a mixed bag. Great to see the effective results of Martin Lewis’ impactful government lobbying with the £90 admin fee for obtaining a debt relief order now being scrapped.
This years budget does carry significant implications for the average UK resident, weaving together a complex picture of financial adjustments, incentives, and support mechanisms aimed at navigating through economic uncertainty and towards growth and stability. Let's delve into how these measures translate for the average person.
National Insurance Cut
The 2p reduction in National Insurance contributions is a direct financial boon for employees and the self-employed. This cut means more money in the pockets of working individuals, reducing the slice of their earnings that goes towards this payroll tax. However, with the thresholds for paying income tax and National Insurance frozen, individuals may find themselves paying a higher proportion of their income in tax over time as their earnings increase, a phenomenon known as fiscal drag. This could offset some of the benefits of the National Insurance cut, especially for those experiencing wage growth.
Child Benefit Changes
The expansion of child benefit eligibility to households earning up to £60,000 (fully) and £80,000 (partially) is a significant boost for middle-income families. This adjustment not only provides additional financial support to more families but also acknowledges the rising cost of living and its impact on child-rearing. Families previously edged out of eligibility due to income thresholds will welcome this change, offering them extra support in managing the costs associated with raising children.
New Tax on Vaping and Adjustments in Consumer Goods Taxes
The introduction of a new tax on vaping products from October 2026, while designed to ensure vaping remains a cheaper alternative to smoking, introduces an additional expense for vapers. This measure, alongside the £2 increase per 100 cigarettes and the freeze on alcohol duty, reflects an attempt to balance health considerations with fiscal needs. For the average consumer, these changes may prompt a reevaluation of spending habits on such products.
Support Measures and Cost of Living
Continued support for individuals struggling with the cost of living, through extended government funds and the scrapping of the £90 admin fee for obtaining a debt relief order, directly addresses the financial pressures faced by many. These measures provide a safety net and aid in managing household finances amid economic challenges.
Impact on Housing
For those looking to buy or sell property, the Budget introduces several changes. The cut in the higher rate of tax on profits from selling property from 28% to 24% may benefit sellers, while the end of tax breaks for holiday let properties and the stamp duty tax break for purchasing multiple properties could influence investment strategies and housing market dynamics. These adjustments aim to address issues in the housing market, including affordability and investment behaviors.
Economic Growth and Inflation
The broader economic forecasts and measures, including the expected growth rates, inflation targets, and public debt projections, set the stage for economic stability and confidence. For the average person, a stable economic environment can translate into job security, predictable living costs, and confidence in long-term financial planning.
In essence, the Budget aims to strike a balance between providing immediate financial relief and incentives, supporting vulnerable groups, and laying the groundwork for sustainable economic growth. While some measures offer direct financial benefits, others, like the freeze on tax thresholds and new taxes, may require adjustments in household budgeting and spending behaviors. Overall, the Budget reflects a strategic approach to navigating current economic challenges while investing in the UK's future prosperity.
I hope this helps you in navigating your own approach to your personal finances. Remember to review your own situation and any impact to your personal budgeting.
With love
Sarah x