Delivering today’s Budget, chancellor Rishi Sunak said the UK economy will grow 6.1% this year, according to the Office for Budget Responsibility (OBR), up from the 4% forecast at the March Budget but just below a 7% consensus among economists.
However, the Chancellor warned of “challenging months ahead”. The OBR says inflation could hit almost 5%, the highest level seen in 30 years.
Here is a summary of how the key measures will affect your personal finances:
Tax
We’d already had the increase to National Insurance (NI), which will start to take a bite out of pay packets from next April.
Rishi Sunak’s tax hikes since March 2020 mean the tax burden on the British public will reach its highest level since the Labour government of the 1950s, the OBR has said. In addition to the NI increase, the freezing of various allowances will also net the government some healthy sums.
Pensions
Although the chancellor resisted the urge to tinker again with pension allowances. The lifetime allowance remains frozen at £1,073m, a level which will remain in place until 2025/26. The standard annual savings allowance remains at £40,000.
If the allowances don’t increase in line with inflation it effectively means you can save less in real terms each year.
There was further cause for concern as the government did not announce a date that the state pension triple lock would return.
Saving and investments
NS&I Green savings bonds are now on sale for at least the next three months with an investment range of £100 to £100,000 per person. The bonds will raise money for the government’s environmentally focused infrastructure projects and form a key part of the green finance plans laid out by the chancellor in the March budget.
However, the 0.65 per cent savings rate is beaten by more than 50 other competing providers. The amount deposited will be held for three years and you cannot withdraw your money during this time.
Meanwhile, the adult ISA allowance has stayed the same for the fourth year in a row at £20,000. The Junior ISA allowance also remains static at £9,000.
Cost of living
A planned rise in fuel duty has been cancelled in the wake of rising petrol prices, which the Chancellor said will save drivers almost £8bn over the next five years. The levy was due to rise from 57.95p per litre to 60.79p. The price of petrol has already spiked recently, hitting its highest level on record on Sunday, at an average daily price of 142.94p per litre.
The Chancellor Sunak also scrapped a planned increase in duty on alcohol worth £3bn and simplified taxes to help pubs as they struggle to recover from the coronavirus pandemic. The number of main duty rates has been cut from 15 to just six – the stronger the drink, the higher the rate.
Net zero strategy
In the run-up to COP26, the Chancellor emphasised the Government’s £30bn of public capital investment in the UK’s green industrial revolutions since March 2021.
Despite this, there were contradictions around climate change within the budget, with the Chancellor also reducing rates for domestic flights.
£7bn business rate cut
A new 50% business rates discount will be applied to the retail, hospitality, and leisure sectors over the next 12 months, up to a maximum of £110,000 per firm. In announcing the change, the Chancellor vowed wider reforms to business rates that would “ease the burden” on high streets by making them “fairer and timelier”, saving companies £7bn over the next five years.
He also announced that green investment relief will be introduced to encourage businesses to adopt green technologies such as solar panels – a welcome move.
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If you’d like to know more about the changes announced and how this might affect you, please get in touch today.
