New Chancellor, New Plans? and Inheritance Gifts

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0:30originally deposited, and any profit you might have made. This is not a recommendation or offer to buy, sell, or attain any specific investment or service. Fall tastes better with better ingredients from Whole Foods Market. No added growth hormones or antibiotics in their meat department means slow-braised short ribs are even more satisfying. All seafood is wild-caught, like their vibrant sockeye salmon or verified responsibly farmed. and all sweets, including fall-themed cookies, are made without high-fructose corn syrup. Spice up fall at Whole Foods Market. Hello, welcome to this Moneybox podcast.

1:09Nearly two million households in England and Wales cannot afford their water bills. What is the answer to water poverty? And if you want to reduce your family's inheritance tax bill, can you just give your money away? But first, new week, new Prime Minister, a largely new Cabinet, not least, of course, a new Chancellor of the Exchequer. In the last few seconds we've heard that the new Chancellor of the Exchequer will be John Healy. The new Chancellor is to be John Healy. The former Defence Secretary was Andy Burnham's first appointment to his Cabinet. He replaces Rachel Reeves, who had served as Keir Starmer's Chancellor since Labour's 2024 landslide election win.

1:50And almost as soon as John Healy was appointed, the announcements began. Tuesday, remove VAT from household electricity bills. Wednesday, the£3 cap on single bus fares in England cut to£2. Thursday, pubs, clubs and live music venues in England promised a 20 % cut in their business rates. But what about that major issue on the doorstep, identified by the new Prime Minister, Andy Burnham, when he was campaigning to be elected to Parliament in his new constituency of Makerfield. You know, the issue, he said, was mentioned more than any other. The frozen personal tax threshold. That's the point, of course, at which income tax begins.

2:34It's been stuck at£12 ,570 a year since 2021, despite a law which says it should rise each year with inflation. Late on Wednesday, the Prime Minister said that there is no commitment at this point to change, but we will look at that at the budget. Well, that commitment, to at least look at it, will please these shoppers in Warrington. My income has been stagnant for some time, but everything else is going up. So the difference between the two is getting narrower and narrower. If the threshold went up, it would be really helpful to me. We've worked all our life from leaving school, paid our taxes, we get clobbered for taxes everywhere, and now I've retired, I'm still paying taxes.

3:25We don't seem to be able to escape it. Because I'm currently in the situation where I was looking to draw down on my pension because I've been looking after parents being their main carers for some time. and now they've both passed away. And then thought, maybe I'll get a little job and whatnot. But this little job, what was a 20-hour contract, sort of 28, 27, 28 hours. And of course, that's creeping me over what I can earn in the year in terms of tax and whatnot and national insurance. So I would be delighted, yeah, yeah. Listener Ruth, a pensioner, also got in touch about how much tax she is paying.

4:08I can't manage on the amount that I get with my teacher's pension, which is very small, and the old age pension or the state pension. And I'm really struggling with that. It seems that every time either of the pensions goes up, the amount I actually receive goes down. So I'm literally getting poorer and poorer. And the result of that is that I'm struggling on an income which is just barely more than$12 ,500 a year. The only way I can manage is being miserably frugal. What I would love was for the threshold to be raised to even$15 ,000 a year. I'd feel delighted if it would just increase to$15 ,000.

4:57That would help me and many of my friends and millions like us. Moneybox listener, Ruth. Well, listening to all that is Jonathan Cribb. He's Deputy Director at the Institute for Fiscal Studies. Jonathan Cribb, the amount you can have before you pay tax unchanged since April 2021, five years of what economists call fiscal drag. Now, we have talked about this on Moneybox when it began and during that time, but people hadn't felt it, didn't understand it, but they certainly seem to now, don't they? Yeah, and I'm not surprised. You know, at the beginning, it doesn't feel like so much. Inflation erodes the value of that allowance.

5:35But as we go on, the kind of difference between what it is and what it would have been if these tax rises hadn't happened gets bigger and bigger. And people are now looking ahead another four years of these frozen tax thresholds and thinking, well, that's a considerable increase in tax that I'm paying. Yes, and it's worked for the government, of course, because we paid£23.8 billion in income tax just in June, and that's almost 13 % up from a year earlier. And not just because of the personal tax threshold, but it's also the higher rate thresholds frozen too. £50 ,270 outside Scotland, and tax wax up to 40%.

6:15So people are feeling it at all levels. Absolutely and indeed you go further up and there are other frozen thresholds £100 ,000,£125 ,000 so unless you have an extremely low income you can't avoid these tax rises And what about pensioners like Ruth? She says she has a small pension and her state pension and she's one of many people who will end up being taxed on that low income Well, pensioners are going to be struggling with the cost of living just as working age people are. Of course, on average, pensioners pay slightly less tax on their income than working age people because of not paying national insurance.

7:01I think what's really obvious here is that just the lack of growth in earnings of people's pensions is really becoming very starkly obvious to people, particularly in the context of these frozen tax thresholds. There will be a problem, though, next April, won't there? Because the new state pension, the standard amount, will be higher than the frozen tax threshold. And that's sort of the ultimate giving with one hand and taking with the other, isn't it? It is. The state pension's always been taxable, but it's clearly very salient to people that for those who are just reliant on that, that they're going to be paying income tax.

7:40The Chancellor has confirmed that what Rachel Reeves' policy was, that they won't be paying tax in this Parliament. In part, that's a technical thing so that lots of people, millions of people don't have to suddenly start filling out some form of tax return. In the longer run, there's a decision needs to be made. Are the government going to increase the personal allowance, start increasing it, either for the whole population or going back to what we had quite a long time ago, which was a higher personal allowance for pensioners? Yes. Ruth, of course, was suggesting there that the tax-free personal allowance should be£15 ,000.

8:16And if it had risen with inflation, my calculations would put it just over£16 ,000. Would a change like that be possible for the Treasury? How much would it cost just to raise it even with inflation for one year? Well, it's always uncertain exactly how much these things are going to cost. If we look at the whole freeze that's going on between now and 2031, the four year freeze, if you were to not do that tax rise and allow the personal allowance alone to rise in line with inflation, that would cost nine billion pounds a year in the long run. You know, that's a significant tax cut or more precisely lack of tax rise, but it is baked into the government's plans.

9:02So if they want to do that, to allow the personal allowance to go up again, they'll need to cut spending elsewhere or raise some other taxes. And we'll find out, of course, at the budget, as the prime minister said, in a word, literally, when do you expect the budget? Personally, I'm hoping early November, not too late, not too early. Jonathan Cribb from the Institute of Fiscal Studies, thanks. Now, if your recent water bill was a bit of a shock, nearly two million households in England and Wales can't afford to pay their water bills at all. Water poverty, as it's known, means that water costs them more than five pence in every pound of income after housing costs, and that leaves many unable to pay their bills, giving them growing debts to their water supplier.

9:48And that debt, of course, puts up costs for all of us. Now, these figures come from a study of government data from 2024-25. It was commissioned by the Consumer Council for Water, who we'll speak to in a moment. But first, Dan Whitworth has been delving a bit deeper. Dan? Yeah, do you know what, Paul? Away from the numbers, away from the research, away from the headlines, the reality of water poverty can be awful. Very few cases. It's only really a tiny proportion, Paul. involve people who can pay but won't pay. The vast majority of people in water poverty, they just can't afford to pay their water bill.

10:23Sheena is a mum of two small children who ended up owing several thousand pounds to her water supplier after a relationship broke down. It doesn't leave you feeling good at all and you do panic and as much as you want to pay it off, when it gets to a point where it is so much and they're asking for so much, you look at your finance and you're like, how am I meant to spread everything so between everything and you do, you still make that sacrifice of what's more important and it just doesn't get paid even more so my water bill I would say is a lot when you're thinking of your food with that's gone up, cancelled tax it is hard when you're trying to juggle your finance even though you want to pay everything if you've not got that much coming in either you're still trying to find where to send everything Now Sheena eventually managed to get the debt written off to be able to try to start again.

11:11She was helped by Sam Wollstonecroft, the senior debt manager for Christians Against Poverty in Bolton. About half of our clients have water debt when I go and see them. I've been doing this job for about 12 years and I would say that water debt has become a bigger debt for people than it used to be. Most people I see, they're struggling with broken budgets so we are just trying to get people to make sure they've got enough food and we're prioritising council tax and we do prioritise water. Water always goes in the budget, but we are aware that people prefer to spend money on food and other essentials.

11:48It is so important, Dan, isn't it, to get proper debt advice like Sheena did, but what help do water firms offer to stop that debt building up in the first place? Well, lots of help is available, but who qualifies for it depends on each supplier's own rules. And what help is available also differs, again, from supplier to supplier, but it can include things like a cap on your total bill, a percentage discount or money taken off. Now WaterShore is a different national scheme across England and Wales for some people on benefits who have high water usage like parents with young families or disabled people.

12:25Now water bills of course they didn't used to be a bill that too many people had to worry about but now even those who are managing to keep on top of their water bills well they can struggle. Could they make it go lower for families? Of course they could. Will they? I don't think they would. Well you're watching what you're doing when you're turning the tap on, you know what I mean? You're only washing parts once a day, you're just letting them pile up because you don't want to keep turning your tap on. I wouldn't say I'm in poverty, you know what I mean, I'm managing, but you're still being careful, you're still watching what you're using water-wise.

12:55I'm struggling to be honest, I work hard, my husband works hard, I do really feel for people who haven't got much money. Now in Scotland, water services are publicly owned and discounts are applied through council tax and there are no charges for domestic water use in Northern Ireland. Now Water UK told us suppliers are helping more people than ever before with their bills with more than£4 billion in financial support up to the year 2030 and that anyone struggling should contact their supplier for help. Thanks Dan. Well listening to that in the Salford studio is Andy White from the Consumer Council for Water.

13:31Andy White you represent consumers and commissioned that research. We didn't used to take water bills that seriously did we compared with energy and council tax as Dan said. Were you surprised that 1.8 million households are living in what you call water poverty in 2024-25? I was not surprised. I was saddened. I think it's really, you know, we shouldn't be in a position where people are left unable to afford their water bills. And far too many people are. So I think we really need action. We've heard that more people are getting help than ever before. And I'd urge anybody who does need that help to reach out and take it.

14:14But actually, the current system also needs to be looked at because it leaves a current postcode lottery at the moment. Did your research look at what sort of households were most affected by water poverty? It did. And we found that actually ethnic minority groups were at more risk of water poverty. Also, we found that single people, working age single people, single parents and also those that were in debt were twice as likely to be at risk of water poverty as well. And that research looked at the year 2024-25, and of course that was before the big rise in England and Wales in April 2025. Inevitably, I suppose things will be much worse now.

14:58That's our concern, and this is why we're tracking these water poverty levels over time, and we'll be looking again next year at what impact those bills have had. More support is coming in, but actually we're concerned that the rising bills will outstrip that support. Yes, because you're modelling it and this is the first time it's really been monitored as I understand it. And can I just ask though, not being able to afford the bill doesn't mean doing without water, does it? Because you can't be cut off, can you? Is that why people tend to leave it rather than pay it and pay other bills instead?

15:31It's certainly the case that people never get that sort of letter that says we're going to be cutting your water off. But I think most people approach water bills in the same way as others. They see it as an essential service which they want to pay. But ultimately, when they reach out for professional help from debt advice agencies, they are going to prioritise those where they will be loss of service if they don't. Yes, and as we heard, people are careful with it, especially, I suppose, people with metres about how much they use. Now, your council, Consumer Council for Water, has called for what you call a national social tariff.

16:04That's a reduced tariff for low-income households with their water bills. How would that work? So what we would see is there a single scheme across England and Wales. So that would replace this current postcode lottery of support where different help is available in different regions. And would it mean that people who did pay their bills had to pay a bit more? Because Alison emailed us to say, you know, if everyone else paid for it in their bills, that would be unfair to people like me, she implied, who is just about managing to pay her bill in full. If her bill went up, she would be paying for other people.

16:37The support at the moment is largely funded through bills. Some water companies also contribute through profits and we'd like to see much more of that. In an ideal world, we'd like to see this publicly funded. But actually, if you fund it through bills, there is a benefit to customers because you can avoid people getting into debt, which ultimately can increase customer bills if that debt is ultimately written off and costs spent on chasing that. Andrew White from the Consumer Council for Water. Thanks very much. Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments.

17:16Capitalize on around-the-clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker and get started. See what adding futures can do for you at cmegroup.com forward slash podcast. Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This is not a recommendation or offer to buy, sell, or attain any specific investment or service. Fall tastes better with better ingredients from Whole Foods Market. No added growth hormones or antibiotics in their meat department means slow-braised short ribs are even more satisfying.

17:52All seafood is wild-caught, like their vibrant sockeye salmon or verified responsibly farmed. And all sweets, including fall-themed cookies, are made without high-fructose corn syrup. Spice Up Fall at Whole Foods Market.

18:34paying it will rise. And it's understandable, I suppose, that people who will pay it want to minimise the amount the Treasury takes. One way to do it that I sometimes recommend is just to spend it or give it away. A new research by the Independent Financial Advisors, the private office, found that more than eight out of ten of their middle-aged or older clients believe parents and grandparents should pass wealth down before they die. Now we have lots of listeners' questions about giving money away. Here's Simon. Obviously, we would like to help our children while we're still alive so that we can sort of see them enjoy the money.

19:09We've got two boys. They're both thinking about getting married in the not too distant future. Just to give you an example, if I was to give, say,£13 ,000 in one year, so I exceeded the£3 ,000 by£10 ,000, and then And two weeks later, I was hit by a bus. At what point do HMRC tax that money? Would the tax man sort of just take 40 % of that£10 ,000 excess? Or does that£10 ,000 get added to the value of my estate and only taxed if the overall value of the estate exceeds the threshold? Well, another listener, Colin, would like to do something a little bit more complicated. I've got two children, one in America, one in New Zealand.

19:56I've got two grandchildren in New Zealand. Obviously, they are making their own way in life. So you think, well, what can I do to help them? Because I don't need this money at the moment. And relatively recently, over the last sort of three, four years, I became aware of the ability to gift out of surplus income. But then you find there's very little guidance on what counts as surplus income. Well, two very different ideas there. With me is David Dodgson, an independent financial advisor from the private office. David Dodgson, Simon first. Simon and his wife want to give a fairly modest£13 ,000 between their two boys.

20:40I hope the boys are listening. Would that be taxed? Not immediately, no, Paul. And what a lot of people forget to think about are the exemptions that you've got in terms of inheritance tax. And one of the really important ones is with regards to marriage, because you've got the ability to actually gift£5 ,000 to your child in respect of their wedding. And that won't be subject to an inheritance tax liability. And of course, there's a£3 ,000 limit, isn't there altogether apart from that? and it applies to married couples. They each have that£3 ,000. And I think you can go back a year. So can you actually give£12 ,000 away without worrying about it if you haven't done it before?

21:24Absolutely. Yeah, so they're in a good position. It's a great idea for the sons to get married. Well, of course, marry the one you love is always my top tip for avoiding inheritance tax. So not everyone is in a position to do it. And Colin has heard of gifts from surplus income. That's a bit more complicated. How does that work? Yeah, it's attracting a lot of attention at the moment. And essentially, it's really important that you assess whether or not you've actually got any surplus income. Because if you have and you can prove it and document it, you can give that away on a regular basis. and when you actually have, let's say, passed away, your executor, if they've got evidence that that was surplus income, i.e.

22:10above your expenditure requirement, that will not be considered within the inheritance tax net. Yes, I know some people have been caught by that, haven't they? And they haven't had the records and things. What record should you keep, particularly if you're making these regular gifts? Because the poor old executors come in, they don't know what your life was like very often. And what I would say, make your executor's life easier for them once you've gone away. And how you do that is, and I would suggest, I mean, in terms of getting help on this, if you have a look at the IHC 403 form that HM Revenue and Customs have on their website, on page eight of that, it gives a very useful breakdown of the sorts of things that you need to document.

22:55Now, if you use that on an annual basis before you pass away and you've got that record, that's an excellent way to help your executors prove that all of that, those gifts or the regular, let's say, gifts you were making were, are going to be exempt. That's very helpful. Page 8 of IHT403. We don't usually have specific recommendations like that. Now, going back to your clients, eight out of 10 of those 45 years and older said it was a good idea to give money away. Is that growing? And do you think that's a trend that is growing and why? It undoubtedly is. From our experience, a key catalyst to this sort of gifting has undoubtedly been the impending, let's say, disappearance of pensions into the IHT net as from April 20, from April next year, April 20, 2027.

23:50that has resulted in people thinking right I don't want to have my pension subject to an inheritance tax liability what can I do with it well you can start gifting away regularly during your lifetime for instance to reduce the amount in your pension that's going to be subject to inheritance tax liability yes you can convert your pension into an income for that can't you just briefly you know we are talking about giving money away but it is true as I said at the start 19 out of 20 won't even pay it. If there's less IHT taken, then the government's going to have to raise taxes elsewhere briefly.

24:26Yeah, that is quite possible. But the income that you take out of a pension will be subject to an income tax liability. So that might balance things out a little bit possibly for them. Balancing things out. David Dodgson from the private office, thank you. And I must say, we're getting quite a lot of emails and tweets about this and all sorts of things. But just before we go, Felicity Hanna. She's been on manoeuvres for Moneybox Live. Managing your money as a member of the armed forces can be completely different to civilian life. Pay, perks and promotions all work differently. And there are real challenges too.

25:01Only 22 % of army families are happy with their current financial situation. I've been out to a barracks in the northwest to find out just how armed forces finances work. If you want to share your experiences email moneybox at bbc.co.uk and don't miss the programme on Wednesday at 3. Felicity Hanna, but the rest of us are plotting our own beach invasion as the Moneybox podcast takes its summer break. You can still send us your thoughts and fears about money by emailing moneybox at bbc.co.uk or send a voice note or message on WhatsApp 0306 783 183. We shall read them on the beaches, we shall read them in the fields and in the streets and in the hills until, in God's good time, we can step forth to the rescue.

25:48When your next Moneybox podcast drops on the last Saturday in August. Well, apart from Winston Churchill, in this podcast were Dan Whitworth, Joe Krasner, Amber Mahmood and Catherine Lund. Studio manager was Ben Kesselman. And from the team, our editor Jess Quayle and from me, Paul Lewis, have a great summer listening to BBC News Money and Work Productions for BBC Sounds. Christmas 1988. A plane takes off from Heathrow Airport. 38 minutes later, everyone on board is dead. A Libyan man, Abdul Basset al-Megrahi, is convicted of murdering 270 people. But that's not the end of the story. Almost four decades on, fresh evidence and a new trial.

26:38I'm Miles Bonner In this podcast I'm delving into a world of extremist groups Mysterious intelligence agents And global politics From Radio 4 This is Intrigue, Lockerbie Listen first on BBC Sounds

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