The Government has announced a reversal of several of the measures in its mini-budget which will affect people’s finances.
On Friday 23rd September, the Government outlined a mini-budget that aimed to address some of the challenges currently facing the economy. This included changes to income tax, National Insurance and various other measures that affect Police Officers and working people across the UK.
Many of these measures have now been reversed, with Chancellor Jeremy Hunt saying the reversal of those changes are "what’s necessary for economic stability". Mr Hunt said the reversal of “almost all” of the original measures would be worth approximately £32 billion a year.
These changes will affect Police Officers and all working people financially, so it’s important to know what's happening and how it will affect you.
The changes and what they mean for you
Cut in the basic rate of income tax scrapped
The previously announced cut to the basic rate of income tax from 20% to 19% will no longer take place. The rate will remain at 20% until “economic conditions allow for it to be cut”, according to the Treasury.
In the mini-budget, former Chancellor Kwasi Kwarteng had promised the cut for those with an income between £12,571 and £50,270. The reversal of the policy means, if your annual pay falls within this range, you'll continue to pay income tax at a rate of 20% for the portion of your earnings above £12,571.
Those earning £50,271 or more will continue to pay 40% income tax on the portion of their income above this threshold. The 45% income tax rate remains in place for anyone earning more than £150,000 a year.
Reduced support for energy bills
In the mini-budget, the Government announced the Energy Price Guarantee, a support package aimed at reducing the unit cost of gas and electricity so that a typical household in Great Britain pays, on average, approximately £2,500 a year for their energy bills.
Initially due to run for two years, the Chancellor has now said the support plan will end in April 2023, meaning that only this winter’s bills will be covered by the policy. After that point, a Treasury review will decide what support will remain in place.
The changes don’t affect the £400 Energy Bills Support Scheme, which will still be paid to all UK households in six monthly instalments from October. Additionally, the most vulnerable UK households will continue to receive £1,200, paid in instalments throughout the year.
What hasn't changed?
Reversal of previously announced 1.25% NI rise
The mini-budget outlined a reversal to the recent rise in National Insurance, effective from November 6th. Since April 2022, taxpayers have been facing a 1.25% rise in their National Insurance contributions.
Mr Hunt confirmed the Government would be sticking with its plans to reverse this increase.
Increase in stamp duty thresholds
The Government's mini-budget also announced plans to cut the amount of stamp duty paid when people buy a property in England and Northern Ireland. It said no stamp duty would be paid on the first £250,000 of all property purchases and, for first-time buyers, none on the first £425,000.
The new Chancellor has confirmed that these measures will remain in place, despite the reversal of many others. Stamp duty is calculated as a percentage of the total cost of a property and remains as follows:
- 0% on property purchases up to £250,000 (£425,000 if you're a first-time buyer)
- 5% of purchase price between £250,000 and £925,000
- 10% of purchase price between £925,000 and £1,500,000
- 12% of purchase price over £1,500,000
Keep your own finances steady
The mini-budget and subsequent reversal came at a time when many Police Officers and Staff are facing serious financial difficulties. Steve Hartshorn, National Chair of the Police Federation of England and Wales, recently said “members and their families are still under huge financial pressure”.
The cost of living crisis is being felt by Police Officers and citizens alike, with the price of fuel, food, gas and other necessities creating an incredibly difficult situation to manage. Additionally, a disparity between increases in costs and Police pay means that people are finding it harder than ever to make ends meet.
In these challenging times, make sure you're accessing all the resources available to you, whether it's free money from the Government via the Lifetime ISA or tax-free allowances and bonuses with friendly society savings accounts.
It's also important to understand what you're being paid and what's being deducted from your salary, both now and in the future. Download our 2022/23 Police Pay Scales Guide to stay up to date with salaries and allowances across all ranks and pay points.
You can also book a telephone or video call to discuss your financial options one-to-one with one of our financial experts.