Transcription
Okay, the chancellor has not long ago sat down after delivering the budget. I've hastily written my notes and I want to talk you through my instant analysis and reaction. Remember, I don't do the politics. This is about the retail stuff. What affects the pound in your pocket. I've got information on tax and energy and pensions and savings and benefits and student loans and mobile bills, property, and more.
We'll start with the tax thresholds. They have been frozen. We knew they were going to be frozen until 2028. They're now being frozen until 2031. This is a stealth tax known as fiscal drag. What happens here is if you freeze a threshold because average earnings and inflation goes up, so people are earning more and the threshold stays the same. More a bigger proportion of your income is paid in tax than it would have been otherwise if the threshold had gone up. So that's going on for longer beyond the next election.
Interestingly, now savings, there are big changes coming to savings. All of these happen in April 2027. The big one is that the cash ISA threshold will be cut from you being allowed to put in £20,000 per tax year to you being allowed to only put in £12,000 per tax year. The shares ISA will stay at £20,000, which will mean from that point you'll be able to put £12,000 into a cash ISA and the remaining £8,000 into shares. Remember, this is only for new money. Any money in there is not affected by this one.
There is a carve-out, though, and I had a conversation with the chancellor about this. The reason she's cutting this is not to raise revenue. They're cutting it because they want to encourage younger people to invest. So when I was in with her a couple of weeks ago, I said, "But that's ridiculous. If you cut this for everyone, that means older people that you don't want to invest are going to be punished." Well, what they've said is over 65s will not have the cut. So they will still continue to have the £20,000 per tax year ISA allowance. And remember, this only affects new money going in. Existing money in ISA stays the same.
But there's another hit to savers, too. They're going to be increasing the tax on savings, interest, property, money coming in from property investments, and dividends by 2%. So that means a basic rate of savings tax will no longer be 20% from 2027. It will be 22%. The higher rate will be 42% from 40%. The top rate will be 47% from 45%. Now remember, most people don't pay tax on savings because as a basic rate taxpayer, you can earn £1,000 pounds of interest a year um without paying tax on it. But if you earn more than that and it's outside of an ISA, then that tax rate will be going up.
Next one, energy bills. Pleased on this one. From April 2026, so next April, there is going to be a reduction in the cost of energy bills. What they're doing is they're taking some of the levies, some of the policy costs that I've been ranting about in the past few days, and they're going to be moving those into general taxation. They're also getting rid of the ECO scheme. Now, this is going to mean a reduction of the unit rate, the amount you pay for each unit of energy you use of around, I've been told, I've just had a conversation with someone senior in the government on this. They're telling me around 3.4p of the electricity unit rate and 0.3p per kilowatt hour of the gas unit rate. Overall, everything else remaining equal and of course the price cap moves so it won't be remaining equal, this should be about £150 a year off a typical energy bill going into perpetuity.
The big question is this: will this apply to fixes? I have been told again, just had a conversation with someone very senior on this. I have been told that the government intends for companies to pass on these savings directly to consumers and they will be working on it. I have been very strong on this: to not pass it on to fixes would basically break the competitive energy market. So this should be a reduction off everybody's bills from next April.
Next one, salary sacrifice pensions. From April 2028, sorry, April 29, there will be a limit on the amount of money you can salary sacrifice to get the National Insurance gain. If you don't know what this is, you're probably not doing it. Basically, people who are have their salary reduced by their firm and the firm then pays that into their pension and that way both the firm and the individual gain on National Insurance. Currently, the amount is unlimited, but from April 2028, you'll only be able to get that gain on a £2,000 salary sacrifice. You can sacrifice more. You just won't get the National Insurance gain on it.
Next, the state pension. Uh, well, we already knew this is going to rise 4.8% in April 2026, which means the full new state pension will be £12,547, up just under £600 quid a year. The full old state pension for people who hit retirement age before April 2016 is £9,615, up £439 quid. What's really interesting here though, remember I talked about fiscal drag, those thresholds being frozen? It's pretty sure that from April 2027, if you get the full new state pension, it will be taxable. And of course, we have no clue how people will pay tax on it. The government has said it will ease the administrative burden for pensioners whose sole income is the state pension and have to pay a small amount of tax. So I think that means they will pay tax, but it'll be easy to administer on it. So going to be doing more digging on that and talking about that in days to come.
Big one here, big political one. The government is ending the two-child benefit limit from April 2026. Lots of confusion about what this means. Let me try and plan it for you. Currently, if you're on Universal Credit and you have more than two children, you do not get any extra benefits for the additional costs of your third or fourth or fifth child. That will all change. So, if you have extra cost due to those children, you will get extra benefits to it. Now, just to be clear, this is not about child benefit, the payment, the universal payment that everyone gets. Nor is it about the benefits cap, which is a limit on the total amount of that people can get on benefits. It is a very specific limit on the amount of money you get depending on how many children you have within the Universal Credit system.
Now, the next one was a surprise. Student loan plan two loans. Plan two loans are from students from England who started university. That's what counts between 2012 and 2022 and from Wales who started university from 2012 onwards. They have announced that they are freezing the threshold. So just like fiscal drag with student loan payments, freezing means that your income goes up. So you pay a bigger proportion on student loans, 9% above the threshold. The threshold's currently £28,470. It will go up in April to £29,385, but then frozen until 2030-31. So for those on plan two loans, you will effectively be paying, if you're over the threshold, a bigger proportion of your earnings than you would have done back in your student loan. So doubt you'll be very happy about that one.
Uh, Lifetime ISAs. I'd hope we'd hear an announcement on the Lifetime ISA, the first-time buyer ISA where you get a 25% bonus if you're buying a first-time property up to £450,000. I was hoping we'd see that £450,000 going up. No, what they have said is they're going to consult in the beginning of next year on a new first-time buyers ISA to replace the Lifetime ISA. Now, I'm sorry for the code I'm using. When I chatted to a very senior member of the government about this, what I was told was they were they will be looking at and promised they will be looking within that consultation of also whether they should be increasing that £450,000 threshold on the Lifetime ISA. I am also going to be saying, look, you're doing a new Lifetime ISA or a new first-time buyers ISA. The Lifetime ISA will be dead for people like the Help to Buy ISA currently is. Please, can you make sure that both of those could be transferred seamlessly into the new ISA? I'll be asking them. Obviously, the consultation is not starting till January.
Next one, high income property search charge. So, basically, it's going to work on top of the council tax for those people who have properties valued over £2 million. This is England only. This will start in April 2028. Just give you the cost quickly. For houses £2 million to £2.5 million, it's £2,500 a year. £2.5 million to £3.5 million, it's £3,500 a year. £3.5 million to £5 million, it's £5,000 a year. £5 million up, it's £7,500 a year.
H next one. Those of you who are on O2 will know that it hiked its prices more than it said it would when you started, which it shouldn't do. I've been ranting and raving about that. I wrote the chancellor a letter in the budget documents and I have been told by a senior member of government. The chancellor will be writing a letter to Ofcom to ask them to tighten the rules on that, which I'm pleased to hear.
If you got an electric vehicle from April 2028, there will be a 3p per mile surcharge on top that you will have to pay. We don't yet know how you'll pay it, whether you have to declare it and how they measure it. And one and a half p on plug-in hybrids on top of vehicle excise duty.
And finishing off in England, bus fares, rail fares, and prescriptions been frozen. The fuel duty cut, which is extended another year. It's always extended. So fuel duty won't be going up. The cost of booze will be going up with inflation next April. And cigarettes are going up with inflation plus 2%. I'm nearly run out of time. I have to do this in under 10 minutes. This is just my short summary. I'm interviewing the chancellor tomorrow morning. That and as well as more detailed explanation will be on my show at 7:30 Thursday night, ITV. Do watch. I'm going off to do some more work. Ta.