BBC sounds, music, radio, podcasts. 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 rather than 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 won't mention in the budget but are in the documents about stamp duty and child benefit. There'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 waspy and mortgage prisoners and life-time ISIS 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 bean tune. I've got meals. I've got to pay. So I'm going to work for the world. I've got to live for the world. I've got to live for the world. I've got to feed. So I'm going to make sure everybody
We can now speak to Martin Lewis, money-saving expert. Of course, host of Five Lives of the Martin Lewis podcast here to what his fingers gently through the many pages of Rachel Reeves' 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 prosay, the consumer finance, the personal finance, the pound in your pocket, whether it's about the national insurance, rise for employers, the minimum wage stamp duty,
Keras, which was a big change going on in there, not as big as I'd liked. Child benefit, which wasn't mentioned, but is in the underlying documents, helped to save, not mentioned, but in the underlying documents. There's a lot going on, and this is only not longer after she sat down. So this is a whopper of a budget. This is a full-on double whack of an extra tomatoes on top of a budget.
I mean, we waited a long time for it. So, you know, it's good. It's good. It's all that. So let's deal with some of those things then. National insurance, let's start with national shorts 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 shorts.
Well, clearly what's happened is the last Conservative government dropped national insurance for employees by two percentage point. That 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 go. 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, but 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. It 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 cash insurance you pay, you don't pay, 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. So 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 put 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
a brand that 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. But 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 employees more money too. Yeah. But 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. What 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
It's 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. While they change child benefits, so it is based on a household income. Child benefit currently works based on the highest individual earning parent's income.
Now that leaves to iniquity in the system because what you could have is you could have one parent who earns £80,000 and a penny and doesn't get any child benefit and two their next-door neighbours who are both earning £70,000 so they have for a 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 that you get isn't going to happen. We are going to stick on an individual income assessment for child benefit. The thresholds, the new thresholds haven't changed so you'll still stop 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 them in 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. 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 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. But 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 was a 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 do you want me to ask him about? I mean, you're like the political stuff. You're finding this fascinating. 35% of the questions we had for me to ask Jeremy Hunt,
were about that job in a 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 the threshold. People were pleased to see the threshold go up, but they won't like the fact that 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 to. Let's talk about stamp duty, the changes that were anyone looking to buy a house or sell a house or whatever might be. What do we need to know about stamp duty?
OK, so let's do the stuff that was announced and then the stuff that wasn't spoken about was announced is that stamp duty is to rise for people buying second homes.
Tomorrow. Currently, you pay an extra 3% stamp duty on top of the normal stamp duty. If you're buying a second home from tomorrow, that goes up to 5%. That is a really big increase, an increase of 2% points there. 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. And 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 taps 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, well, that's complicated wording, then we will in practice see anybody buying the property after next April, if it costs over £125,000 or costs over £300,000 for the first time buyer will be paying more stamp duty and more people will be paying stamp duty. Wasn'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 and particularly 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 and it's not something I cover. What we're seeing in inheritance tax is the thresholds are unchanged. Now, it's worth remembering on how inheritance tax this is a tax when I do polling that about 40% of people fear and only 4% of state 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 pounds of your estate,
you will not pay any inheritance tax. That rises to £500,000 of your estate if you are leaving your primary residence to direct this 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 imagine you and I, Matt, we haven't met, but let's imagine we're married. It's very nice to meet you, sir. Right. So when Matt... I'm fast-barted. I know, I swear. Everything I do is fast. Very charming, right?
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 worth of assets. I die first. I know everybody's very upset about it and I leave everything to you. So you now have £900,000 worth of assets.
that 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. So 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 died before the age of 75, then your pension is passed on effectively tax-free. If 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, but 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 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 eyes and cross teeth for you on it.
I know it's very early days. She only stopped talking a couple of hours ago. 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, I wanted to pass that on, then there were some reliefs there, which I think could tell. There are reliefs for farmland, but the problem with it is you also have some people who bind to farmlands who want 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 try and keep it for those who are just farmers. But I will leave it for someone else. Do you sign up? I knew you did. 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 in my living, and knowing about it as an interested generalist.
Yeah, right. Very good. Right. Let's talk about the minimum wage. I know you touched on that because that is going. That is going up. It was actually announced yesterday. But if you are on the minimum wage, that 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. You don't get paid minimum wage, which may sound tortologists. 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 age, wage, you put in your diary the 6th of April, you should be getting a pay rise on the 6th of April, right? 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 Keras and ours.
So the carers of the backbone of this country, people who care for their loved ones in this country, you know, 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, 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 and many of these people, these carries are on minimum wage.
they haven't realized 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 crapped. Sorry, I shouldn't say that. 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.
So what are they doing about CARES allowance? Well, they're increasing the earnings threshold. So currently, you're not allowed to earn over £151 a week. From next April, that will be increased to £196 a week, which is a decent whack. I'm pleased to see it. It's getting on for around 20% 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 caras but the cliff edge will still be in place next April so i would say to any caras you can now earn more and you will be covered if the minimum wage goes up because the caras 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 a hundred and ninety six pounds
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 get right to the nitty-gritty. Never mind all the big stuff announced in the House of Commons. There's all the stuff we're just hidden away in the documents. All, like you said, the changes that have been made. Martin, I'm very excited. Come on, we've been for the first time in five life, and now we're married. We'll smash out the... We'll get you all to be fine. Yes, exactly. We can do the rules, so now you divide up the money. Martin... Listen, you forget, we died as well in the middle of the inheritance check. We did the whole... We did the whole of life in just a few minutes. Let me chat with you, mate.
Okay, 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 in a 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. And 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.
I'm not doing this bad thing that would affect you all negatively. I'm just keeping it until twenty twenty eight the bad thing that affect you all negatively. Now 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 you're having to make a positive the fact that you're not doing what have been rumored 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 and those tax thresholds don't. And there is no change to that.
I've talked about care as allowance. State pension, let's do state pension quickly. We 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 pounds 20 a week to 230 pounds 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. But 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 with £11,400 or less. You have to work to get winter fuel payment and its pension credit is a critically under claimed benefit. Well, 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 that manage migration from legacy benefits onto universal credit, speed it 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. So for basic rate tax payers, it's going up from 10 to 18%, and it's going up from 20 to 24% for higher rate tax payers. 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 it happens, or we'll be talking about in the podcast, I'm sure.
We've 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 its lower is going up from two to three pounds. No rise in fuel duty, a penny off of 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. I 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 us the first time, but you wouldn't have to pay a fine if you take your money out of a lifetime. I said, 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 waspy compensation either, so 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 pecadillos on it. And I think that gives you a decent summary, but let me just finish with the caveat. The chancellor 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've seen. 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. If 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.
Martin Lewis is the founder of moneysavingexpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing Martin Lewis Podcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review, however you listen.
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