How will mini-budget announcements affect UK households?

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Households will have their finances overhauled as a result of Chancellor Kwasi Kwarteng’s mini-budget, including a series of tax cuts.

Here you can read what it can do for you.

– Home movers

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

The “zero rate” stamp duty bond is doubled from £125,000 to £250,000.

New buyers pay no stamp duty up to £425,000. New buyers can take advantage of the exemption when they buy a property that costs less than £625,000 instead of the previous £500,000.

The measures will reduce stamp duties for all movers by up to £2,500, with new buyers having access to up to £8,750 in exemption.

But potential buyers still face hurdles from rising mortgage rates and rising house prices, making it harder to make a down payment.

Taking into account all the recent Bank of England base rate hikes, a tracker mortgage is now on average about £210 a month more expensive than before the rate hikes started last December, according to figures from UK Finance.

A standard variable rate (SVR) mortgage is now about €132 more expensive per month.

Estate agents Savills said the biggest beneficiaries of the stamp duty changes are likely to be prime buyers in London and the more expensive parts of the south east of England.

The government said it will provide further details in the coming weeks to increase housing supply.

Government documents also said the Scottish and Welsh governments will “receive funding through the agreed fiscal framework to allocate as they see fit”.

– Taxpayers

A year ahead of schedule, there will be a 1 cent reduction in the base income tax rate.

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

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The addition rate will also be abolished from April 2023.

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

It means that all annual income above £50,270 is taxed at 40%, the current higher rate of income tax.

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

But some argue the move could fuel inflation.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “Our research shows that additional taxpayers have much more leeway in their budgets, and significantly more likely to do so as we move through the cost of living crisis.

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

“Putting money in the pockets of higher earners also carries an inflation risk. If they don’t need this extra money to fill a gap in their budget, there’s a risk that their spending will increase, pushing prices up even further.”

The 1.25 percentage point premium increase that took effect in April will also be reversed from November. This means, according to the government, that 28 million people in the UK will save an additional £330 a year on average by 2023/24.

– Savers

Those who would otherwise be extra rate taxpayers will benefit from a £500 tax-free personal savings deduction from April 2023, in line with higher rate taxpayers. This was not available to them before.

There will likely be a wave of activity among Britain’s biggest earners looking to take the opportunity to get a 45% tax credit on their pension contributions

The personal allowance allows people to earn certain amounts of interest without paying tax on it.

There may also be an advantage for higher earners to put money into retirement while still being able to get a 45% exemption on the cost of saving for retirement.

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Former Pensions Minister Sir Steve Webb, who is now a partner at consultants LCP (Lane Clark & ​​Peacock), said: “There will likely be a surge of activity among Britain’s highest earners looking to take the opportunity to claim tax relief at 45% on their pension contributions.”

– Energy bill payers

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

The £400 utility bill support program will be paid in six monthly installments across Britain from October, with additional support for particularly vulnerable households.

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

But charities have warned that many households are already in financial trouble and struggling with bills.

– Employees

The plans include legislation to force unions to put wage offers to the vote of members so that strikes cannot be declared until negotiations have broken down completely.

Universal Credit claimants who earn less than the equivalent of 15 hours per week at National Living Wage must regularly meet with their job coach and take active steps to increase their earnings or their benefits will be reduced.

This change is expected to bring an additional 120,000 people into the intensified job-search regime, according to ministers.

The government said average real wage growth in the UK has been largely stagnant for 15 years, largely due to poor productivity growth.

It argues that the only sustainable way to raise living standards and fund vital public services is to unleash growth, including helping the unemployed find work and those in employment into better-paid work.

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To support working families, the government also said it is implementing reforms to improve access to affordable, flexible childcare.

– Job seekers

Job seekers over 50 get extra time with job center job coaches to help them return to the job market.

Rising economic inactivity among the over-50s is contributing to labor shortages, driving up inflation and holding back growth, the government said.

– Bankers

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

– Alcohol drinkers

The excise duty on alcohol will be frozen from February 2023.

The tax cut will save consumers 7 cents on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits, the government said.

– Freelancers

Some freelancers will again have to make sure they pay the right taxes by figuring out their employment situation themselves.

Employees who provide their services through an intermediary will again be responsible for determining their employment status and paying the correct amount of tax and national insurance contributions

The chancellor said he would tear up the 2017 and 2021 amendments, transferring this responsibility to employers when a person provides services through their own company or another intermediary.

The changes to the IR35 rules would be withdrawn from April next year, the government said.

“From this date, employees who provide their services through an intermediary will again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions,” it said.

“This will free up time and money for companies that hire contractors to spend on other priorities.”

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