What does the mini-Budget mean for personal finances?

ii experts dig into the numbers.

Income tax cut and National Insurance hike U-turn

• 1p cut in in the basic rate of income tax will be brought forward by a year to April 2023.
• The 45% additional rate income tax band, which is paid by people who earn more than £150,000 a year, is set to be abolished from April 2023.

Source: interactive investor

• Learn more: What is a SIPP | ISA vs SIPP | SIPP Tax Relief Explained

Alice Guy, Personal Finance Expert, interactive investor, says: “The big news is the chancellor’s decision to scrap the additional tax rate of 45% giving the top earners a massive pay boost. Someone earning £200,000 will save an eye-popping £2,877 per year. 

“Meanwhile, cutting the basic rate to 19% will have less effect and will benefit someone earning £20,000 by only £74 per year. It will go only a little way towards helping with spiralling energy and food costs this winter.

“The changes to income tax, together with the reversal of the 1.25% increase in National Insurance would result in an annual saving of £5,220 for someone earning £200,000, dropping to £392 for a middle earner with a £30,000 salary. The difference is stark.”

Stamp duty changes

• The threshold at which the tax falls due has been raised to £250,000 from its current £125,000 level.
• The threshold for first-time buyers has been increased from £300,000 to £425,000.
• The value of the property on which first-time buyers can claim stamp duty relief has increased from £500,000 to £625,000.

Source: interactive investor

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Runaway house prices coupled with rising mortgage rates and the cost-of-living squeeze on budgets already meant that the property market had increasingly became the preserve of wealthy buyers in many areas. 

“Wannabe homeowners seeking to buy a home valued at £292,000, the average UK house price, according to official statistics, will see no change from the new stamp duty rates – the levy wouldn’t have been applicable to them under the old regime. The change mainly benefits high earning first-time buyers and those with sufficient backing from the Bank of Mum & Dad. 

“The benefit of the new regime kicks in on purchases of homes valued at £400,000. Buyers would save £5,000 on stamp duty, rising to £6,250 for homes valued at £500,000.

“Those looking to move up the property ladder will pay £2,500 less in stamp duty on purchases of homes worth £250,000 and over. 

“But the stamp duty changes could create more problems than they solve. The real issue is housing inventory – there are not enough homes to meet demand. Last year’s stamp duty holiday has shown us how effective the measure is in stimulating demand. Fuelling demand for homes without addressing one of the key reasons for the red-hot housing market could serve to add coals to the flame.”