New chancellor Kwasi Kwarteng announced a permanent stamp duty cut and a reduction in income tax in his mini-budget today.
His speech took place at 9.30am on 23 September in the wake of the cabinet reshuffle and the energy price freeze.
This article outlines how the mini-budget announcements will affect your finances. We will update it as the day goes on.
1. A stamp duty cut
From today the government has permanently reduced the amount of tax you pay when buying property or land in England and Northern Ireland.
This means the threshold will increase so that:
- You no longer have to pay stamp duty on the first £250,000 of a property (up from £125,000).
- First time buyers no longer have to pay stamp duty on the first £425,000 of a property (up from £300,000). The value of the property on which first-time buyers can claim this relief has also increased from £500,000 to £625,000.
The change means that 200,000 people will be taken out of paying stamp duty altogether.
The government hopes that cutting stamp duty will stimulate the housing market by encouraging people to buy property.
A temporary stamp duty holiday had been introduced during the pandemic and house prices soared. Prime minister Liz Truss has previously said that reducing this tax is “critical” to economic growth.
You can find out the stamp duty thresholds and how much you could save in our guide.
2. Income tax cuts
The chancellor announced two major changes to income tax bands:
- The government will bring forward its cut to the basic rate of income tax by a year. This means it will reduce to 19p in every £1 in April 2023 (up from 20p in every £1).
- He will also scrap the additional rate of income tax, which will benefit workers on the highest salaries who earn more than £150,000. The top tax band will be 40% instead of 45%.
If you want to see how much income tax you pay now then enter your earnings into our free tax calculator.
The cut in basic rate band means that the amount of tax relief you can earn from your pension savings will also fall to 19p in every £1. We explain more about pension tax relief.
3. Reversal of April’s national insurance hike
Yesterday the government confirmed plans to reverse the 1.25% rise in national insurance contributions.
In April, national insurance contributions increased by 1.25% for both employees and employers. But this will be scrapped on 6 November.
This means 28 million workers will have more money in their pockets. On average, each worker will get an extra £330 in take-home pay over a year.
The increase in the national insurance threshold, which came into force in July, will remain the same.
See how your annual and monthly national insurance bill will change in November.
If you want to see what your national insurance bill is now then use our income tax calculator (this tool will shortly be updated to reflect the November change).
4. Energy price freeze costs
The new chancellor shared further details on how much it will cost to deliver October’s cap on energy prices.
Prime minister Liz Truss has said unit rates and standing charges on default tariffs will be frozen from 1 October for two years. This means a household will pay an average of £2,500 a year for energy usage until 2024.
The previously planned cap had been set to cost households an average of £3,500 for an annual energy bill, so the freeze will save them about £1,000 each year.
We have more detail on the energy price freeze.
In his mini-budget Kwarteng said the energy package is likely to cost £60 billion for the six months from October. It is understood that it will cost £150 billion to deliver the two-year energy price guarantee.
Read about whether it’s worth switching to a fixed energy deal.