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Budgeting Breathing Space

The Chancellor of the Exchequer, John Healey billed his first budget as one for working people and business, looking to provide breathing space in an economic climate which is severely affected by the war in the middle east. But it could equally have been seen as one which looked to reassure the markets that all spending commitments were balanced by savings or increased income elsewhere. So, for example, measures taken to provide energy relief to poorer households including a £100 payment to those in council tax bands A-D will be paid for by a temporary increase in Bank Corporation Tax surcharges. Similarly, an increase in gambling machine duty will help to offset a freeze in business rates for business, hospitality and leisure properties.

For investors, one key announcement reverses the planned cut in Cash ISA investment levels for under 65s, meaning that all investors will continue to be able to invest £20,000 as they wish across relevant ISA types including cash, stocks & shares and innovative finance ISAs. The circumvention rules have also been scrapped meaning that the planned charge on interest received in stocks & shares ISAs will no longer go ahead.

A further shake up of ISAs was also announced with a new first time buyer ISA coming in in 2029 and the penalty on withdrawals above the LISA property price cap being reduced from 25% to 20% with immediate effect. The government is also to consult on potential incentives for those investing in stocks & shares ISAs for the first time.

On the minus side, tax on property and savings income is to be increased by a further 2% from April 2027. This will give a basic rate of 24%, a higher rate of 44% with an additional rate rising to 49%.

Other measures, most of which were pre-announced include:

• A rise in the fuel rate for using personal vehicles for work purposes
  
• A freeze on fuel duty
  
• Gas standing charges to be scrapped by the end of 2027 or as soon as possible after that. A review will also take place in respect of electricity standing charges.
• The removal of import tariffs on a range of food goods.
  
• The temporary VAT cut on electric bills is to be extended until July 2027.
  
• The introduction of a pension tax allowance will ensure that those pensioners whose income is at or below the level of the state pension will not pay tax. This allowance will be tapered for those earning just above the state pension level.