HOUSEHOLDS will be wondering how the financial changes announced in the Chancellor’s Spring Budget will affect them.
Jeremy Hunt set out the government’s financial plan for the year yesterday, including payments, tax hikes and policy updates.
HOAR’s calculator will help you work out how the tax changes will affect you
The Treasury has confirmed a freeze on income tax and National Insurance thresholds until 2028 will still go ahead.
The freeze was meant to come to an end in 2026, but it has been extended, dragging millions more into paying a higher rate of tax.
That’s because inflation and rising wages will mean more workers will go over the thresholds for paying tax at 40%.
Thresholds usually increase regularly to take both of those things into account.
Meanwhile, drivers won’t pay more for fuel as duty was frozen and a 5p cut will continue in a huge win for HOAR’s campaign to keep it low
It means motorists will be spared a feared 12p rise – a combination of the end of the cut and an inflationary rise.
It’s not all good news for drivers though, as car tax will rise from next month in a blow for millions of motorists.
Cigarette prices will also rise after the government hiked tobacco tax.
But alcohol duty on beer in pubs will be cut, saving 11p per pint, while tax on wine and spirits will increase.
All in all, there’s a lot going on with changes to tax, which might leave you wondering whether you’re better off or not.
That’s why we’ve put together HOAR’s tax calculator, created with tax advisors Blick Rothenberg, to help you work out how much tax you’ll be paying and what your take-home pay will be.
You can find HOAR’s tax calculator here.
The calculator includes how much better off (or not) you’ll be following yesterday’s Budget.
How will the income tax freeze affect me?
Essentially, inflation and pay increases will mean more people being dragged into higher bands.
The UK’s rate of inflation in January fell to 10.1%, while regular pay in rose by 6.5% from November 2022 to January.
Put simply, this means that with wages steadily climbing, more people will become higher rate taxpayers and see a portion of their pay disappear.
Someone with the average UK salary of £33,000 will be paying almost £2,600 more income tax due to the freeze – a 10% increase – according to AJ Bell.
Those earning £50,000, and so hovering just under the current higher-rate threshold, will be hit the hardest.
It is estimated that they will be paying £6,570 more in income tax over the entire period of the tax freeze.
That represents a 17% increase in their income tax bill over that period.
As part of this year’s Spring Budget Mr Hunt has extended the current £2,500 Energy Price Guarantee until July.
He has also confirmed two Universal Credit changes for working parents which will see them save hundreds of pounds a year.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
