Martin Lewis’ MoneySavingExpert (MSE) has issued a warning to UK households over five things that were missing from Labour’s Budget.
Chancellor Rachel Reeves delivered the autumn Budget in the House of Commons this week, announcing £40 billion a year in extra taxes.
The tax hikes will be used to pour money into the NHS, schools, transport and housing, but a £25.7 billion increase in national insurance contributions paid by employers is likely to reduce wages and lead to job losses, despite the party’s pledge to protect “working people”.
Other major changes included a change to inheritance tax rules, which will see inherited pension pots subjected to inheritance tax from April 2027, plus an increase in capital gains tax to bring in £2.5 billion for public spending.
But while the Budget covered many major topics, Martin Lewis’ MSE has highlighted five key things that weren’t addressed and will have an impact on many households.
Lifetime ISA withdrawal penalty
Labour did not announce plans to cancel the Lifetime ISA (LISA) scheme for first time buyers. LISA’s are designed to help people aged 18 to 39 to buy their first home, with savers given a 25 percent government boost when they use the funds to buy a qualifying first property.
The scheme allows people to save up to £4,000 a year towards their first home, but those who buy a property above the £450,000 maximum covered by the programme, or who use their saved cash for anything other than a home, such as retirement, face a 25 percent penalty.
Mr Lewis had called on Labour to reduce the “unjust” cancellation penalty from 25 percent down to 20 ahead of the Budget, but the plea has failed to be addressed.
Speaking on his podcast before Wednesday’s Budget, Mr Lewis said: “Many people, especially in London and the southeast, and other urban metropolitan areas, have been priced out by house prices going up.
“So they saved – as the government told them to – for their first-time property, but their property is now above £450,000. To take the money out, even to buy a first-time property, which is what this product is for, they are facing a penalty, a substantial penalty.
“There is a justice issue here. Many of our young people who’ve done what the state asked them to by saving for a first-time 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 to me to be unjust.”
According to MSE, an estimated £1.8 million in fines were paid in the 2023/24 tax year for taking money out of LISAs.
Tax-free childcare
Martin Lewis’ MSE called on the government ahead of the Budget to rename its ‘Tax-Free Childcare’ scheme to help 800,000 families that are currently missing out.
The scheme offers up to £2,000 a year per child towards childcare costs, including nurseries, childminders and some holiday camps. Around 1.3 million families are eligible to claim it, yet around 800,000 are not currently claiming it.
Speaking on his website, Lewis said: “Tax-Free Childcare is appallingly named, DON’T let it confuse you. Calling the scheme Tax-Free Childcare was a political spin to ensure government gets credit for the scheme.
“Unfortunately the name is appallingly misleading, and probably partly responsible for the scheme having a much lower take up than it should. It’s not about tax in anyway, and isn’t linked to the tax rate you pay.
“A better name would be ‘Working Families Childcare Top-up’, because it’s effectively a discounted childcare savings scheme where you save and then pay for childcare with a 25% top-up.”
Winter Fuel Payment
Martin Lewis’s MSE had urged Labour to make the eligibility criteria for the £300 Winter Fuel Payment less restrictive in the Budget, but this was also snubbed by the government.
Labour recently changed the criteria to make the payment a means-tested benefit, meaning pensioners have to be claiming Pension Credit or certain other benefits to qualify for it. It means some 10 million people who used to be eligible will now miss out.
Lewis had urged the government to expand it to a wider group of people after claiming the current criteria was “too narrow”.
‘Mortgage prisoners’
Lewis had called on Reeves to address the hardship faced by so-called “mortgage prisoners”, but again this plea was overlooked.
Mortgage prisoners are homeowners who typically took out a mortgage before 2008, when lending rules were more relaxed. Now, Lewis says these homeowners are trapped on pricey mortgage deals as high as 9% and unable to switch to cheaper ones because they don’t pass current strict affordability tests.
WASPI compensation
Martin Lewis’ MSE also notes that the Budget failed to mention any redress for the WASPI (Women Against State Pension Inequality) women, who say they were treated unfairly when the State Pension age rose from 60 to 65.
