How the Latest Budget Impacts Your ISAs, Cars, and Pensions: What You Need to Know for Your Finances

Chancellor Rachel Reeves’ Budget: Key Changes Explained

Chancellor Rachel Reeves recently shared her budget, and some details had already leaked. Here’s a simple breakdown of the important changes and what they could mean for you.

Tax Updates

1. Income Tax: The income tax thresholds will stay frozen until 2031. This means if you receive a pay increase, you might end up paying more tax even if your income hasn’t kept pace with inflation. It’s important to note that many people may not even earn enough to pay income tax. In that case, you may feel the pinch more through VAT when buying goods.

2. Council Tax for High-Value Homes: Starting in April 2028, homeowners in England whose properties are valued over £2 million will face an extra council tax charge. This so-called “mansion tax” targets around 100,000 properties, especially in London and the South East.

Driving and Transport Costs

1. Electric Vehicles: If you have an electric vehicle (EV), you can expect new road pricing starting in 2028. You will be taxed per mile, adding to existing road taxes. While fuel duty is frozen for the next few months, it will gradually increase starting September 2026.

2. Train Fares: Regulated rail fares in England will not increase until March 2027, which is a first in 30 years. This freeze applies to various tickets, including season passes for commuters.

3. Bus Fares: There is also a cap on bus fares at £3 for single journeys, effective until March 2027.

Income Growth

1. Minimum Wage Increase: The minimum wage will rise in April. Here’s how it breaks down:
   • National Living Wage for workers 21 and older will be £12.71 an hour (up from £12.21).
   • For 18 to 20-year-olds, it will be £10.85 (up from £10).
   • For 16 and 17-year-olds, it goes to £8 (up from £7.55).

Savings and Benefits Adjustments

1. Cash ISAs: The annual tax-free savings limit for cash ISAs will drop to £12,000 for those under 65. This encourages investment in riskier assets. For the over-65s, the limit remains at £20,000.

2. Universal Credit: The existing two-child limit for those claiming universal credit or tax credits will be removed in April, allowing families with more than two children to receive support.

Pensions and Benefits

1. Pension Changes: Any salary sacrifice pension schemes will have a cap of £2,000 from April 2029, which could reduce saving incentives.

2. State Pension Increase: In April, the state pension will rise by 4.8%, reflecting wage growth. This brings the new flat-rate pension to about £241.30 a week.

3. Benefit Increases: Some benefits will rise by 3.8% in line with price increases.

Health and Other Measures

1. NHS Prescription Charges: The fee for NHS prescriptions will remain at £9.90 for the second consecutive year.

2. Changes to Motability Scheme: Those using the Motability scheme will no longer be able to access high-end cars like BMWs or Audis.

In summary, this budget has a mix of tax adjustments, wage increases, and changes to benefits that could affect many families in the UK. Keeping these updates in mind can help you better navigate your finances over the coming years.

For more detailed information, you can visit BBC News for the full budget breakdown.

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