How will mini-budget announcements affect UK households?

Household finances are being turned on their head by Chancellor Kwasi Kwarteng’s mini-budget, which includes a series of tax cuts.

Here’s a look at what it could mean for you.

Permanent stamp duty cuts in England and Northern Ireland could encourage more people up or down the property ladder.

The ‘zero rate’ stamp duty margin is doubled from £125,000 to £250,000.

First time buyers pay no stamp duty up to £425,000. First-time buyers can access the relief when buying a property costing less than £625,000 instead of the previous £500,000.

The measures will reduce stamp duty bills by up to £2,500 for all movers, with up to £8,750 in relief for first-time buyers.

However, potential buyers still face obstacles from rising mortgage rates and rising house prices, making it harder to come up with a down payment.

Factoring in all of the Bank of England’s recent rate hikes, a tracker mortgage is now, on average, about £210 a month more expensive than it was before the rate hikes began last December, according to figures from UK Finance.

A standard Adjustable Rate Mortgage (SVR) is now around £132 more expensive per month.

Estate agent Savills said the biggest beneficiaries of the stamp duty changes will likely be first-time buyers in London and the more expensive parts of the south-east of England.

The government said it would finalize further details on increasing housing supply in the coming weeks.

Government documents also said the Scottish and Welsh governments “will receive funding above the agreed fiscal framework to allocate at their discretion”.

A 1p cut in the property tax rate comes a year ahead of schedule.

From April 2023, the basic income tax rate will be reduced from 20% to 19%, meaning 31 million people will be better off by an average of £170 a year.

The additional tax rate will also be abolished from April 2023.

Also from April 2023 there will be a flat higher income tax rate of 40% instead of an additional 45% on annual income over £150,000.

This means that any annual income over £50,270 will be taxed at 40%, the currently higher income tax rate.

The government said high tax rates hurt the UK’s competitiveness.

But some argue the move could fuel inflation.

Those who need the least help will receive the most. Putting money in the pockets of higher earners also increases the risk of inflation

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Our research shows that taxpayers with supplementary tax rates are much more likely to have, and will be dramatically more likely to have, wiggle room in their budgets as we go through the cost-of-living crisis.

“So those who are least desperate for help will receive the most.

“Putting money in the pockets of higher earners also increases the risk of inflation. If they don’t need that extra money to fill a hole in their budget, there’s a risk that their spending will increase, driving prices even higher.”

The 1.25 percentage point increase in social security contributions that came into effect in April will also be reversed from November. This means 28 million people in the UK will keep an average of an extra £330 a year in 2023/24, according to government figures.

Those who would otherwise have been higher-rate taxpayers will benefit from a tax-free personal savings allowance of £500 from April 2023, matching higher-rate taxpayers. This was not previously available to them.

There is likely to be a flurry of activity among Britain’s top earners trying to make the most of a chance at a 45% tax break on their pension contributions

The personal savings amount makes it possible to generate certain interest amounts tax-free.

There could also be a snag for high earners to put money into their pensions while still being able to get 45% off the cost of saving for their retirement.

Former Pensions Secretary Sir Steve Webb, who is now a partner at consultancy firms LCP (Lane Clark & ​​Peacock), said: “There is likely to be a flurry of activity among the UK’s top earners trying to make the most of the chance at tax breaks to do with 45% on their pension contributions.”

The Government has previously confirmed the Energy Price Guarantee, which will reduce the unit cost of electricity and gas, meaning that a typical UK household will pay an average of around £2,500 a year on their energy bill for the next two years from October 1.

The £400 energy bill support scheme will be paid in six monthly installments across the UK from October, with additional support for particularly vulnerable households.

Together, the price guarantee and support scheme will save the typical household at least £1,400 over the next year compared to the October 2022 price cap.

However, charities have warned that many households are already struggling financially and struggling with bills.

Among other things, a law is planned that would force unions to submit salary offers to a member for a vote so that strikes can only be called after negotiations have failed completely.

Universal Credit applicants who earn less than the equivalent of 15 hours per week on the National Living Wage must meet regularly with their work coach and take active steps to increase their income or face a reduction in their benefits.

According to ministers, this change is expected to bring another 120,000 people into the more intensive job search regime.

The government said average real wage growth in the UK has been broadly flat for 15 years, in large part due to weak productivity growth.

It argues that the only sustainable way to raise living standards and fund vital public services is to stimulate growth, including helping the unemployed get work and finding better-paying work for those who do to have.

To support working families, the government also announced it would push ahead with reforms to increase access to affordable, flexible childcare.

Jobseekers over 50 are given extra time with job center work coaches to help them get back into the labor market.

Increasing economic inactivity among the over-50s is contributing to bottlenecks in the labor market, driving up inflation and constraining growth, the government said.

The government has said removing a cap on banker bonuses will encourage global banks to create jobs and invest, but critics argue it will see the return of a “culture of greed”.

The alcohol tax will be frozen from February 2023.

The tax cut saves the consumer 7p for a pint of beer, 4p for a pint of cider, 38p for a bottle of wine and £1.35 for a bottle of spirits, the Government says.

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https://www.newschainonline.com/news/financial-news/how-will-mini-budget-announcements-affect-uk-households-294247 How will mini-budget announcements affect UK households?

Mike Fahey

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