Martin Lewis warns about five things in Labor's budget | Personal Finance

Martin Lewis’s MoneySavingExpert (MSE) has warned British households about five things missing from Labour’s budget.

Chancellor Rachel Reeves presented the autumn budget in the House of Commons this week, announcing £40 billion a year in extra taxes.

The tax rises will be used to pump money into the NHS, schools, transport and housing, but a £25.7 billion increase in national insurance contributions paid by employers is likely to drive down wages and lead to job losses, despite the party’s promise to protect social security. working people”.

Other major changes included a change to inheritance tax rules, which will see inherited pension pots subject to inheritance tax from April 2027, plus an increase in capital gains tax to raise £2.5 billion for government spending.

But while the budget covered many important issues, Martin Lewis’s MSE has highlighted five key issues that have not been addressed and will impact many households.

Lifetime ISA withdrawal penalty

Labor has announced no plans to cancel the Lifetime ISA (LISA) scheme for first-time buyers. LISAs are designed to help people aged 18 to 39 buy their first home, with savers receiving a 25 percent government grant if they use the money to buy a qualifying first home.

The scheme allows people to save up to £4,000 a year for their first home, but those who buy a home above the £450,000 maximum covered by the scheme, or who use their savings for something other than a home, such as their pension, risk a 25 percent fine.

Lewis had called on Labor to reduce the ‘unjust’ cancellation penalty from 25 percent to 20 percent ahead of budget, but this plea was not met.

Speaking in his pre-Budget podcast on Wednesday, Mr Lewis said: “Many people, particularly in London and the South East, and other urban metropolitan areas, have been priced out by rising house prices.

“So they saved – as the government told them to – for their first property, but their property now amounts to more than £450,000. To take the money out, even to buy a property for the first time, which this product is for, they risk a fine, a significant fine.

“There is a justice problem here. Many of our young people who did what the state asked of them by saving for a first property in a Lifetime ISA are being fined by the state for accessing the money to do what the state wanted them to do. That seems unfair to me.”

According to MSE, an estimated £1.8 million in fines was paid for removing money from LISAs in the 2023/24 tax year.

Tax-free childcare

Martin Lewis’s MSE called before the Budget for the Government to rebrand its ‘Tax Free Childcare’ scheme to help 800,000 families currently falling short.

The scheme provides up to £2,000 per year per child towards childcare costs, including nurseries, childminders and some holiday camps. About 1.3 million families are eligible to claim it, but currently about 800,000 families do not claim it.

Lewis said on his website: “Tax Free Childcare has a horrible name, don’t let it confuse you. Calling the Tax Free Childcare scheme was a political twist to ensure that the government gets credit for the scheme.

“Unfortunately, the name is terribly misleading and is probably partly responsible for the fact that the program is being used far less than it should be. It is not about tax anyway and is not linked to the tax rate you pay.

“A better name would be ‘Working Families Childcare Top-up’ because it is essentially a childcare discount scheme where you save and then pay for childcare with a 25% top-up.”

Winter fuel payment

Martin Lewis’s MSE had urged Labor to make the eligibility criteria for the £300 Winter Fuel Payment less restrictive in the Budget, but this was also rejected by the government.

Labor recently changed the criteria to make the payment a means-tested benefit, meaning pensioners must claim pension credit or certain other benefits to qualify. It means that around 10 million people who were eligible will now miss out on the support.

Lewis had urged the government to extend it to a wider group of people after claiming the current criteria were “too narrow”.

‘Mortgage Prisoners’

Lewis had called on Reeves to address the hardships faced by so-called ‘mortgage prisoners,” but again this plea was overlooked.

Mortgage inmates are homeowners who typically foreclose on a home mortgage before 2008, when lending rules were more relaxed. Now Lewis says these homeowners are price locked in mortgage deals as high as 9% and can’t switch to cheaper ones because they don’t meet the current strict affordability tests.

WASPI Compensation

Martin Lewis’s MSE also notes that the budget does not mention any recourse for the WASPI (Women Against State pension Inequality) women, who say they were treated unfairly when the State pension age increased from 60 to 65.