Another March, another budget. Budgets are always surrounded by much speculation beforehand and much arguing afterwards. They usually contain a few things that everyone expected, and sometimes a few surprises too. Not to mention a few disappointments.
But what difference will the most recent budget – on Wednesday March 6th – make to your finances? In this article we take a quick look at the aspects of the budget that are most relevant to most people.
National Insurance has hit the headlines this Budget, but what exactly is it, and what has changed in the Budget?
National Insurance is a contribution – in effect an additional tax – paid by everyone in the UK who is employed or self-employed. National Insurance contributions then entitle them to qualify for certain benefits and the State Pension.
There are different types of National Insurance, which are known as classes:
The Budget scrapped the weekly Class 2 NI contribution from April 2024. It also cut the amount of Class 1 and Class 4 National Insurance contributions as follows:
Class 1 National Insurance contributions had been 12% of earnings until January, when it was reduced to 10%. In the Budget, a further reduction was announced from April to 8% of earnings between £12,571 to £50,270 a year.
For an employed person earning £25000 per year, this will mean a saving of around £250 per year.
Class 4 National Insurance contributions on earnings between £12,570 and £50,270 are currently 9%, and this was due to reduce to 8% in April. But in the Budget this was further reduced to 6%, meaning an overall saving of 3% for those paying Class 4 NI contributions.
For a self-employed person earning £25000 per year, this will mean a saving of around £370 per year, also taking into account the scrapping of Class 2 NI contributions.
The Budget also froze tax thresholds. These are the amounts of income that determine the rate at which you are taxed. Current tax thresholds in the UK are:
Income | Rate of tax you pay |
Up to £12,570 | 0% |
£12,571 – £50,270 | 20% |
£50,271 – £125,140 | 40% |
Over £125,140 | 45% |
These limits have been the same since 2021, and will now remain frozen until at least 2028. This could mean that as your pay rises you could move into a higher tax bracket and have to pay more tax from your income than you currently do.
There was good news in the Budget for families who receive Child Benefit. Child Benefit is currently given to all families with children under 16 – or under 20 if they are in approved education or training. But if either partner earns more than £50,000 there will be a High Income Child Benefit Charge to pay, reducing the overall amount of Child Benefit received.
However, in the Budget, the High Income Child Benefit Charge will not be applied until one partner earns £60,000 or above. It will then be taken away entirely if earnings reach £80,000 a year.
Child Benefit is currently £24 per week for the eldest or only child, and £15.90 per week for each additional child. Those amounts are due to rise to £25.60 and £16.95 a week from April.
Whilst there were no plans in the Budget to continue the recent cost-of-living payments, the Chancellor announced new funding for the Household Support Fund. This fund was due to end this month, but has now been extended for another 6 months. The Household Support Fund is used by local councils to help low income families pay household bills and essentials.
There was good news for motorists in the Budget, with no increase in fuel duty. Fuel duty is a tax on petrol and diesel which has been frozen since 2011. As well as the freeze continuing, the Budget also extended a 5p-a-litre fuel duty cut until March 2025. This keeps fuel, which was due to end this month, for a further year, keeping it at 53p a litre. Estimates are that this will save the average motorist around £50 over the next year.
From October 2026 there will be new duties to pay on both vaping and smoking. Vaping products are already subject to VAT, and from October 2026, there will be an additional charge of between £1.00 and £3.00 per 10ml, depending on the amount of nicotine contained. The stated aim of these additional charges is to raise revenue to support public services such as the NHS.
Tobacco duty will also increase in October 2026 by £2.00 per 100 cigarettes or 50 grams of tobacco.
There was no rise to the cost of drinking, with the current freeze on alcohol duty being extended to February 2025.
For those in a position to save money, two new incentives were announced in the Budget:
These new National Savings and Investments (NS&I) bonds are due to launch in April, with the interest rate being announced nearer the time. They are 3 year fixed rate bonds which will offer a safe investment for those able to lock some money away for that length of time.
This new tax-free Individual Savings Account (Isa) will have an additional tax-free allowance of £5,000 – over and above the existing £20,000 tax-free Isa amount. The only condition is that this additional £5,000 has to be invested in British businesses. Whilst this provides the potential for a high return on investment if the businesses invested in do well, it’s also possible that investors could lose money if the businesses invested in do not perform.
We hope that the above information is helpful in understanding how the Budget will affect your finances. Many people reading this will benefit from some aspects, for example the National Insurance reductions and Child Benefit increases, but may have to pay more for tax.
We will keep you updated on any further changes, so do check back here soon for more financial and lifestyle tips from direct lender Munzee Loans.
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