Instant Budget reaction and analysis

0:01BBC Sounds. Music. Radio. Podcast. Hello, I'm Martin Lewis, and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Today is a special post-budget episode, and when I say post-budget, I mean just post-budget. It's rough and ready. The Chancellor has only really just sat down. First of all, I'll be talking to Matt Chorley about the issues there, and then I'll be adding my own tips of the stuff that we don't cover so you get it full and fast. But I need to say it is instant analysis done straight away. I want to talk to you about changes to employers' national insurance, changes and increases to minimum wage, the hidden changes that weren't mentioned in the budget but are in the documents about stamp duty and child benefit.

0:41There's changes to inheritance tax and pensions, there's fiscal drag, there's care and allowance changing, capital gains tax, beers going down, and then there's all the stuff that wasn't in the budget about WASP and mortgage prisoners and lifetime ISAs and winter fuel payments. I'll be trying to jam that all in. I should stop telling you what I'm going to talk about and actually start talking about it. Play the theme tune. I got meals, I got paid So I'm going to work for the world every day I got mouths, I got feet So I'm going to make sure everybody eats We can now speak to Martin Lewis, money-saving expert, of course, host of Five Lives, the Martin Lewis podcast.

1:26Here to run his fingers gently through the many pages of Rachel Weave's budget. Martin, how are you? What did you make of it all? Well, there was a lot more in there than she actually said. I mean, it was a fascinating, a long and detailed budget. I mean, of course, it was a budget that was focused on that crossover between big new funding for the NHS and school buildings, and in her own words, paid for by difficult decisions on tax, welfare and spending. And that was the classic budget that we've seen. It is a tax rising budget and an NHS spending budget. But I tend to look at the more prosaic, the consumer finance, the personal finance, the pound in your pocket, you know, whether it's about the national insurance rise for employers, the minimum wage stamp duty carers, which was a big change going on in there, not as big as I'd liked child benefit, which wasn't mentioned, but it's in the underlying documents help to save not mentioned, but in the underlying documents, there's a lot going on.

2:21And this is only not long after she sat down. So this is a whopper of a budget. This is a full-on double with extra tomatoes on top of a budget. I mean, we waited a long time for it, so, you know, it's good as all that. So let's deal with some of those things then. National insurance, let's start with national insurance, because just because it had been well-trailed or leaked or briefed or whatever it might be, we knew it was coming. Just explain your take on the changes being made to national insurance. Well, clearly what's happened is the last Conservative government dropped national insurance for employees by two percentage point.

2:53That became a political issue. So even though the obvious thing to do would be to reverse that, they couldn't do that because that'd be a tax change on working people, as the phrase goes. So instead, effectively, that cost has been shifted back onto employers. Now, while the headline change, and you were just discussing this, is the increase in the rate from 13.8 % to 15%, that's how much employers will pay to employ people of national insurance. Actually, the real change there, the one that makes the biggest impact is dropping the threshold. So now you will pay national insurance on an employee who earns over five grand a year.

3:26It was£9 ,100 a year. And that means for every employer who pays it, which is a crucial phrase, that's an extra£615 alone just because of that change in threshold at the new rate. And that is a lot of money to be added on. Now, there is mitigation there for smaller firms because the employment allowance, which is how much national insurance you pay, you don't pay a year, has gone up from 5 ,000 to 10 and a half grand. But for firms who pay it, it's an extra£615 per employee. And we need to be honest here. That cost will either be met out of profits, unlikely, increasing consumer charges, possible, or decreasing future benefits and salaries for employees possible.

4:10So while it is certainly not a direct tax increase on working people, it will likely have an indirect effect, especially for those in industries like hospitality and other industries where they will also be putting up the minimum wage. I'm very supportive of them putting up the minimum wage. I've been a campaigner for the charity The Real Living Wage for a long time, and I've done their awards, and I do do stuff for them. And we're finally getting the horribly misnamed National Living Wage, which was a brand George Osborne stole from the Real Wage Foundation, a charity, to try and rename the minimum wage into the real living wage, which it isn't, the National Living Wage, it isn't, it isn't factored on that.

4:51But we're finally now getting closer to where the National Minimum Wage is actually getting closer to the real living wage. That is going up, for those who don't know, from next April, from£11.44 to£12.21 for those aged over 21, and from£8.60 to£10 for those aged 18 to 20, with a hope of equalising it for all over 18s at some point in the future. But of course, that is going to cost employers more money too. Yeah. Right, let's get into the stuff we're really here for, Martin, the stuff that you've spotted that no one else has, because alongside the budget, they publish great bundles of paper and documents and reports.

5:26What have you spotted on child benefit? So I was one of those very loudly campaigning for child benefit with Jeremy Hunt and I met him about it. And I got much of the changes last year that we wanted. But those changes were temporary while we moved to a new system. And I need to explain what happened last year so you can understand. So what happened last year is currently if you earn over£60 ,000, you start to lose child benefit. Last year it was£50 ,000. And then you lose it totally at£80 ,000. Last year it was£60 ,000. So they put the threshold up. But that was a temporary move. That's what the announcement was.

6:03While they change child benefits, so it is based on a household income. Child benefit currently works based on the highest individual earning parents income. Now that leads to iniquity in the system. Because what you could have is you could have one parent who earns 80 ,000 pounds and a penny and doesn't get any child benefit. And two, their next door neighbours who are both earning 70 grand. So they have a far bigger total salary and they do get child benefit. And the promise was we would shift the household income. Well, buried in the papers, they're not going to do that. So that promise that was made last year, and that's why we had the temporary rise in the threshold, in the level of child benefit you get, isn't going to happen.

6:45We are going to stick on an individual income assessment for child benefit. The thresholds, the new thresholds haven't changed. So you'll still start to lose it at 60 ,000 and lose it totally at 80 ,000. So at least they're higher so this is affecting fewer people but we have not got rid of the unfairness in the system they won't be getting rid of the unfairness in the system there are a couple of process things going in place because many people have been unaware they should have had their child benefit clawed back and have therefore had to pay it back later um so they're going to start to do it so that employees will be able to pay what's called the high income child benefit charge um through their tax code and if you're doing self-assessment forms then the amount of child benefit you get will be automatically filled in future.

7:28But I have to say, I'm very disappointed. I don't like unfairness. Regardless of the levels and the rates, unfairness in the system doesn't work. And the way our child benefit is paid is unfair to single parents and dominant and single earner families. And that's not going to be changed. That's been an issue ever since it was introduced. And it's interesting. Again, it's a thing you spotted that something not being included in the budget is significant. It wasn't said in the budget. And I have to say, the reason I think it's interesting is when I interviewed Jeremy Hunt last year and I asked the public what you want me to ask him about.

8:00I mean, you're like the political stuff. You'll find this fascinating. 35 % of the questions we had for me to ask Jeremy Hunt were about that child benefit high income charge. It is a very, very disliked structure. People were pleased to see the threshold go up and I'm glad that that's not the threshold. People see, it is a threshold. People are pleased to see the threshold go up, but they won't like the fact they're not changing it to household earnings. Marty, thank you for that. Let's move on because we've got all these to get through. Let's talk about stamp duty, the changes that were, you know, anyone looking to buy a house or sell a house or whatever it might be.

8:36What do we need to know about stamp duty? Okay, so let's do the stuff that was announced and then the stuff that wasn't spoken about. What was announced is that stamp duty is to rise for people buying second homes tomorrow. tomorrow so currently you pay an extra three percent stamp three percentage point stamp duty on top of the normal stamp duty if you're buying a second home from tomorrow that goes up to five percent so that is a really big increase an increase of two percentage points there but what wasn't said is there had been a temporary increase in the threshold at which you pay stamp duty that is due to end next april the chancellor could have extended that she hasn't extended that So in real terms, stamp duty is going up next April.

9:23And here's what's happening. Currently, you only pay stamp duty on properties that cost over£250 ,000. From next April, you'll pay it on properties that cost£125 ,000 or more. And the absolute amount of tax that you pay will go up because of that extra£125 ,000 worth of property you're paying stamp duty on. Currently, as a first-time buyer, you only pay stamp duty on a property over£425 ,000. From next April, you'll pay stamp duty on a property over£300 ,000. So because she hasn't stopped the planned end to the increase in stamp duty thresholds, wow, that's complicated wording, then we will in practice see anybody buying a property after next April, if it costs over£125 ,000 or costs over£300 ,000 for the first-time buyer, we'll be paying more stamp duty and more people will be paying stamp duty.

10:18Wasn't mentioned in the budget because it isn't technically a change because it was planned, but of course all these things are arbitrary each time you get a budget coming away and a Chancellor can choose to change them, but she didn't choose to change it. So she's inherited that, quote, difficult decision and she's decided to leave it as was. Let's talk about inheritance tax. We've had lots and lots of messages about inheritance tax, in particular around farms, I think, is a big part of this. So what can you tell us about that? Well, I don't cover the farm stuff on it. I'll be absolutely straight because that's business finance primarily.

10:49And it's not something I cover. What we're seeing in inheritance tax is the thresholds are unchanged. Now, it's worth remembering on inheritance tax. This is a tax when I do polling that about 40 percent of people fear and only 4 percent of estates actually pay. The fear of inheritance tax is much greater than the actual penalty of inheritance tax for those who pay it. So let's just go through what the situation is. And it's important to say all the thresholds I'm about to talk about are not changing. They are frozen until 2030. On the first£325 ,000 of your estate, you will not pay any inheritance tax.

11:24That rises to£500 ,000 of your estate if you are leaving your primary residence to direct descendants. That includes children, stepchildren, foster children, biological children, adopted children, all different categories. And the same applies with grandchildren as well. So many people can leave£500 ,000 without inheritance tax. There is also a rule that says you can leave what you like to your spouse and there'll be no inheritance tax on it. And you can also pass them your unused allowance. So let's let's imagine you and I, Matt, we haven't met, but let's imagine we're married. It's very nice to meet you, sir.

12:01right so we're fast martin i know everything i do is fast charming so yeah so um so we've got married we've got married we own a house together it's our primary residence the house is worth 600 grand we've got 300 grand's worth of assets uh i die first i know everybody's very upset about it and i leave everything to you so you now have 900 000 pounds worth of assets but you pat you have my unused allowance. Well, I haven't used any allowance because I left anything to you. So I've got my£500 ,000 that I can leave, including a property, and you've got your£500 ,000 that you can leave, including a property.

12:40So you've now got a million pounds that you can leave, including a property. We've got£900 ,000 worth of assets. Therefore, there is no inheritance tax on your estate. None of that is changing. And in fact, those thresholds have been continued till 2030. There are two big changes. One, which is the one you mentioned, which is about changing exemptions for farmers on land. It just isn't my area. So I'm not going to offer you any information on it because it's just not what I do. The other change, though, which is really big is from 2027, pensions will be included in inheritance tax. Now, the current situation is if you die before the age of 75, then there is your pension is passed on effectively tax free.

13:21If you're over 75, then there is income tax to pay by the recipients of the pension, but it isn't in the inheritance tax regime. From 2027, pensions will be in the inheritance tax regime. Now, pensions can be hundreds of thousands or in some cases millions of pounds. So this is a big change. But if you want details on it, I don't know, because they're just saying it will be in the regime and there will be a consultation. So we don't know how that will work, but we do know it will work. Now, you can imagine we've just got our marriage, our lovely marriage, and it's going well so far, I think. And we've got our£900 ,000 without our pension.

13:56But both of us, we've worked hard and we've saved up another quarter of a million pounds of pension each. So now our total estate is£1.4 million. So now you would imagine, again, it's going to consultation. Now, because we only have that£1 million allowance, now we're going to have to pay an inheritance tax on£400 ,000. That's why this pension change is so substantial. but we just don't have details. So I can't dot I's and cross T's for you on it. I know it's very early days. She only stopped talking a couple of hours ago. And I know, I think there's lots online about the issue with farms. I think it's basically to do with if you and I got married and had a farm and wanted to pass that on, then there were some reliefs there, which I think have been curtailed.

14:39Yeah, there are a release for farmland, but the problem with it is you also have some people who buy into farmlands who aren't farmers who were getting the reliefs too. So what they're trying to do is sort of cut out the people who are doing it as an inheritance tax loophole and trying to keep it for those who are just farmers, but I will leave it for someone else to decide whether they're doing that successfully or not. I knew you did. But I need to say there is a difference between knowing about it as a professional expertise, which is what I do for my living, and knowing about it as an interested generalist, which is all I would claim to be at best.

15:07Very good. Let's talk about the minimum wage. I know you touched on that because that is going up. It was actually announced yesterday, but if you are on the minimum wage, that'll make a big difference. Well, it will. It will make a very big difference. You know, it's a 6.7 % effective rise. It's a cost to employers. The interesting thing about the minimum wage is about half a million people on the minimum wage who don't get paid minimum wage, which may sound tautologist. And this is because there are a lot of offences committed on the minimum wage. Now, the first thing I'd say to anyone on minimum wage, you put in your diary the 6th of April, you should be getting a pay rise on the 6th of April.

15:40Right? It's really important. You should be getting that pay rise on the 6th of April. because sometimes employers don't do it or they don't know and they miss out. Other things you need to watch for on the minimum wage, cost of uniforms or you're having to buy equipment for your work. If they take you below minimum wage, you are being underpaid legally. Also, all of your working time, including opening up and clocking out, all of that type of stuff needs to be included in your assessment for what is minimum wage. So many people missing out on that. Now, where this gets really interesting is we cross it over to one of the other key announcements of the day, which is about carers' allowance.

16:16So the carers are the backbone of this country, people who care for their loved ones in this country. These are the people doing over 35 hours a week of caring. Many of them are vulnerable. Many of them are on low incomes. And the way carers' allowance, which is a relatively low payment anyway, only currently £81.90 a week, it is due to rise to about 83 quid. So not a great rise coming next April. But we have this hideous cliff edge, this hideous cliff edge where you earn one P over the earnings threshold and you lose every penny. I mean, it's terrible. It's a terrible system. And one of the reasons people have fallen foul of it is when minimum wage has gone up.

16:54And many of these people, these carers are on minimum wage. They haven't realised it's gone up. They've earned over the amount that they're allowed to earn. They've therefore lost out massively, losing this 83 quid a week for going, you know, 20 P over the threshold in a week. And they've not known the system's been crap. Sorry, I shouldn't say that word. The system's been poor. So it hasn't spotted. And then they've been asked to claw it back, you know, weeks later, being asked to pay thousands of pounds that they thought was their money. And they have don't have the cash. So we've had, you know, hundreds of thousands of people in this terrible, terrible position.

17:26So what are they doing about carers allowance? Well, they're increasing the earnings threshold. so currently you're not allowed to earn over 151 pounds a week from next april that will be increased to 196 pounds a week which is a decent whack i'm pleased to see you know it's getting on for around 20 percent whack still though and i was pleased that the chancellor because i discussed this with her in person and i've written to her about it acknowledged that this cliff edge is unfair it should be a tapered system they say they are looking into that the department for work and pensions has commissioned, you know, it's not research, it's more a commission on what to do about carers.

18:03But the cliff edge will still be in place next April. So I would say to any carers, you can now earn more, and you will be covered if the minimum wage goes up, because the carers allowance is going up by more than the minimum wage. But you still need to be careful you don't go over that threshold. Just think about it. You're earning, it's not very much, even at the new rate you're earning£196 and you suddenly get a slight pay rise so you're now earning£197 for that£1 pay rise you lose your£83 a week carer's allowance it's not a good system and that's why you're a genius Martin because you you get right to the nitty-gritty never mind all the big stuff announced in the house of commons there's all the stuff which is hidden away in the documents or like you said the stuff the changes that have been made uh Martin I'm very excited we come on we speak for the first time of five live and now we're married uh we'll we'll we'll get divorced it'll be fine yes exactly we could do it also now you divide up the money martin listen you forget we died as well in the middle of the inheritance chat as well i mean we did the whole we did the whole of life in just a few minutes lovely to chat with you mate

19:09okay so that was my chat with matt on five live i'm now sitting and carrying on a few more things that i'd like to mention that i'm going to ask myself you know sort of so martin what's happening to fiscal drag? Well, Martin, I'm very glad you asked me that. Okay. So look, fiscal drag, as many of you will know, is the fact that tax and national insurance thresholds have been frozen so that as average earnings and inflation increases, more people go above the threshold and more of their earnings are above each threshold, which means effectively a higher percentage of their income is taken away in tax.

19:42And this has been the big way in recent years that the Treasury has managed to increase the tax take with this almost stealth tax called fiscal drag, the fact that earnings are increasing higher than the threshold. Now, there was discussion that the Chancellor would be extending that from the current plans to 2028 to 2030. And in fact, arguably her rabbit out of the hat in the budget is the fact she's not going to extend it to 2030. she's going to keep with the Conservative government's plans and leave all these thresholds in place until 2028. I think it was quite interesting the way that that was a big positive play, i.e.

20:22I'm not doing this bad thing that would affect you all negatively. I'm just keeping it until 2028, the bad thing that affects you all negatively. Now, look, of course, we know that this budget was all about doing a big spending boost. And so we understand the rationale behind it. But it's interesting that when you've got so little to play on, And you're having to make a positive for the fact that you're not doing what had been rumoured that you would be doing. But fiscal drag is still here to stay until 2028. So in reality, we are all going to pay more tax and national insurance as earnings and inflation increases.

20:58And those tax thresholds don't. And there is no change to that. I've talked about carers allowance, state pension. Let's do state pension quickly. We've got confirmation that the triple lock is in place. the state pension is going to rise by 4.1%. Now that will take the new state pension, the new full state pension, from£221.20 a week to£230.45 a week. It'll take the old state pension, which the vast majority of state pensioners are actually on, so this is the one that really counts, not the other one that's often commented on, from£169.50 a week up to£176.45. I need to put a slight brackets around that because the other one was an announced figure, whereas the£176.45 is me working out 4.1 % increase what it is because they haven't actually confirmed a number on it.

21:46But I presume it will be within a penny or two correct on that. Worth noting too, that pension credit will be going up by 4.1 % and so will the threshold at which you get pension credit. So currently for a single pensioner, you have to be earning under around£11 ,400 a year to get pension credit, which is a top up to the state pension. If you have total income under£11 ,400 a year from next April, that will be around£11 ,800 a year. And of course, that's absolutely crucial because now that is what dictates whether you get the winter fuel payment or not. Now, one of the things I was hoping to see in the budget was some mitigation of the means testing of the winter fuel payment, because remember, that threshold's pretty low,£11 ,400 or less you have to earn to get winter fuel payment, and its pension credit is a critically underclaimed benefit.

22:38Well, we didn't get any of that. Just to say quickly, benefits are going up with inflation, 1.7 % from next April, and they are going to continue with the Conservative government's planned work capability assessment, which means effectively telling more people who don't think that they can work due to disabilities or other issues that you can work and you should be working, so you need to be working. We're also going to see the managed migration from legacy benefits onto universal credit speeded up. Capital gains tax, I'll mention briefly, it's not changing for second homes, but it is going to be increased immediately for shares and other assets.

23:17So for basic rate taxpayers, it's going up from 10 % to 18 % and it's going up from 20 % to 24 % for higher rate taxpayers. Those are the main announcements. We also had a note in the budget about help to save which is the savings plan for people on universal credit but that's going to be changing from 2025 i'll be honest i don't yet have the details of that it's something i will be bringing to you when and when it happens and we'll be talking about in the podcast i'm sure we got confirmation that private schools will be charged vat from january and that they will also be charged business rates from next april so that is going to increase the cost of private school fees the bus fare cap in england doesn't apply to manchester and london where it's lower is going up from two to three pounds.

23:57No rising fuel duty, a penny off a pint in pubs, cigarette and vape duty going up, as is our passenger duty, a couple of quid for short haul, a bit more, quite a bit more if you're on long haul. And now let's just do very briefly, in my final summary, things that I was hoping would change and haven't. Lifetime ISA, something we've talked about a lot in the podcast. The problem that many young people who saved in a lifetime ISA to buy their first home are now priced out because it has to be a first home under 450 grand. And to get your money out of a lifetime ISA, if you're not buying it for a qualifying first home, you have to pay an effective fine of 6.25 % to the government.

24:33I was hoping they would change the rules on that so that they, and I campaigned and I spoke to the chancellor about it so that you wouldn't have to pay a fine. You wouldn't get the extra bonus they give you to as a first time buyer, but you wouldn't have to pay a fine if you take your money out of a lifetime ISA. Not happening. No news on mortgage prisoners. No news on student maintenance loans going up, which is a real problem for many from the low income backgrounds, because that's the money that you need to live off while you're at university and it's been going up by less inflation. No news on WASP compensation either.

25:05So quite a few things that I was hoping for that aren't in the budget. I hate my podcast. I may as well give you my peccadillos on it. And I think that gives you a decent summary. But let me just finish with a caveat. The Chancellor I only just sat down and recording this less than an hour after the Chancellor sat down after doing her speech. The budget is huge. Her speech is relatively small. This is an instant analysis of what we see. More will come out. So if and when I hear more, if I think it's important to do, I'll be doing it in future podcasts. Well, I hope you enjoyed this special budget edition of the Martin Lewis podcast.

25:42If you found it a bit frenetic, why not go back and listen at your own piece to the one we put out a few days ago on marriage and divorce, the tax benefits of marriage, is it worth getting a prenup, how you divorce cheaply, how assets are separated. It's me talking to a load of specialists. It was absolutely fascinating and worth you having a listen to. And if you like the podcast, subscribe. It's the obvious thing to do. We usually put one out every Thursday.