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martin lewis Rachel Reeves gives her analysis and response to the key policy changes outlined in autumn budgetSaying that the increase in the income tax threshold is a “stealth tax” that will put earners in an even worse position.
The Chancellor unveiled the £26bn price tag on Wednesday tax hike Because he tried to close a billion-pound hole in the country’s public finances.
The decision in this Budget to freeze the tax threshold from 2028/29, to help plug the £20 billion black hole, will raise £8 billion in 2029-30 and pull one in four workers into the highest tax band. An additional 780,000 people will pay taxes for the first time.
money saving expert The founder, whose site offers free and independent advice on saving money, told the BBC’s Martin Lewis podcast that it represented a “stealth tax” that would make low earners worse off.
“You’ll be worse off. Freezing the tax line means that in real terms, people are actually paying more of their income in taxes. You’re still taking home more money because your income is going up. But the spending power of the money you’re taking home may be reduced because of hidden taxes.”
Mr Lewis said his meetings with Treasury officials ahead of the Budget had given him “three wins” and he welcomed some of the policies announced by the Chancellor.
He said he was “delighted” with the Government’s changes to energy charges, which will see households cut an average of £150 on energy bills.
“What they’re doing is they’re taking some of the levies, some of the policy costs that I’m talking about, and they’re moving them into general taxation. They’re also getting rid of the ‘eco scheme’.”
He said he had been told by someone “senior in government” that this would mean a unit rate reduction of about 3.4p from the electricity unit rate, and a reduction of 0.3 per kWh from the gas unit rate, which would be about £150 a year off a typical energy bill.
“The big question is ‘will this apply to reforms?’ I have been told that the government intends that companies should pass on these savings directly to consumers and they will work on this.
Mr Lewis said the changes to the Cash ISA limit, which will see the limit for under-65s drop from £20,000 to £12,000, were not as bad as they could have been, adding that he would “prefer a carrot not a stick approach”.
He said £12,000 a year was still reasonable for many people, and the aim was not to increase revenue but to encourage young people to invest rather than save.
“When I met the Chancellor on this a few weeks ago, I pointed out that huge limit cuts would be perverse, cutting Cash ISA limits for older people to encourage young people to invest would not work,” he said. “So the point made for those over 65 makes complete sense and I’m glad he listened to me.”
“There is also a need for better investment education, easier access to guidance and better investment incentives for young people.”
Mr Lewis also hit out at the OBR’s surprise publication of its economic forecast ahead of the Budget.
He said: “It looks like shocking fat fingers that the OBR publishing Budget results before the Budget will anger the Government.”