UK Budget Day - what does it mean for your money? / by Fiona Mackenzie

It started with jokes about cough sweets and I'm A Celeb, but then moved quickly into a hefty cut to the UK economic growth forecast.

Yes, that's a spreadsheet.

Yes, that's a spreadsheet.

The Office for Budget Responsibility (OBR) has cut how much they expect the UK economy to grow in future, and it's pretty significant.  They still expect the UK economy to grow, but to grow less than previously expected; and the UK economy in 2021 is now expected to be 2% smaller than it was in the last estimate of 2021.  Economic forecasts might seem distant and mysterious, but they're a best guess at where our finances (and so that of the wider country) will end up.   It's worth also saying that these are the worst 5 year forecasts for UK growth since the OBR was set up in 2010, if not in modern history.

Tax, wages and benefits

Some better news:  the Universal Credit 7 day waiting period will be removed and there will be £1.5 billion made available to address some of the issues with Universal Credit.  

Income tax allowances will go up a little, with the personal allowance (the bit that we don't pay tax on) going up to £11,850 next April.  This is pretty much in line with inflation (CPI).

The National Living Wage  will also go up (by 4.4%) to £7.83 next April.

Housing

It was anticipated this budget would be all about housing, so first up, stamp duty changes.

Many first time buyers will now pay no stamp duty in England, Wales and Northern Ireland.  Scotland is not affected by this announcement, unless the Scottish government chooses to follow.  Stamp duty is normally 2% on the property price between £125,000 and £250,000, and 5% on the next £675,000.  On a £300,000 house purchase, a first time buyer will now pay no stamp duty, whereas they previously would have to pay £5,000. 

If buying a property up to £500,000 in value, a first time buyer will pay 5% stamp duty only on the bit above £300,000.  Beware if you buy a home for £500,001: you won't benefit from this first time buyer relief and will have to pay standard stamp duty.

So good news for anyone buying their first home (for £500,000 or less) very soon - but the law of unintended consequences is a cruel one: the OBR expects that house prices will increase by about 1% as a result of this change, which means the real beneficiaries of this change will be those who've already bought homes.

There is also an extra £44 billion to be made available to support building of new homes, and some measures to prevent land and properties being left empty and undeveloped.

Open banking

From next January, if you have a current account with one of the nine biggest banks in the UK, you can expect Open Banking to go live.  This means you can authorise the secure release of your current account transaction data to a whole range of innovative apps [clears throat] like marble.  The Budget includes an announcement that credit card customers (intriguingly only from the 'largest banks') will also be able to transfer their data, although there is no hint of when this might be.

Pensions and savings

At marble, we're always interested in pensions and savings rule changes.  There isn't much joy to be had from this budget, with no real changes for either.

The Lifetime Allowance (the amount you can build up in pensions over your lifetime, before you lose the pensions tax relief) has gone up in line with 3% inflation, so you can save more before you lose the tax relief. Josephine Cumbo at the FT notes that the government was until recently considering reducing this Lifetime Allowance, so this is good news. 

That's about it on pensions: Pension funds (who manage our pension money for us) will be encouraged to invest in a wider range of long term investments, although details on what this means are slim.

Savings weren't a focus at all - the Individual Savings Account (ISA) yearly limit of £20,000 will not change, and pre-Budget speculation that the Lifetime ISA (LISA) might have an increased bonus did not come to pass.

Junior ISA savings limits will increase in line with inflation though, with the yearly limit rising next April to £4,260.

Further Reading

The BBC has a round up of the key points of this year's budget.

Matt Whittaker of the Resolution Foundation has some more analysis (and graphs) of the forecasts for productivity growth - and what this means for the average person.

You want to read the whole Budget, you say?  Well here it is.