On Friday, Chancellor Kwasi Kwarteng announced his mini-budget. The budget mainly focused on tax cuts and roll backs, but it also hailed significant changes to stamp duty.

Here’s a short round up of the announcements:

• From April 2023, the basic rate of income tax will be cut from 20% to 19%
• The 45% top rate of tax, which currently applies on earnings above £150,000, will be scrapped meaning high earners will pay a top rate of 40%
• From today, no stamp duty will be due on the first £250,000 of a property and first-time buyers will pay no stamp duty up to £425,000
• The national insurance rates rise announced earlier in the year will be cut from November
• Universal credit rules are changing for those on low incomes
• Off-payroll working reforms will be repealed

For savers and borrowers, the budget brings mixed blessings with some definite winners and losers.

Mortgage rates and stamp duty

Stamp duty changes are one of the most significant announcements in the mini-budget.

For those looking to buy a property, stamp duty will only be due on any value beyond £250,000, doubling from £125,000. 5% will continue to be due on property values between 250,001 and £925,000, 10% between £925,001 and £1.5 million and 12% beyond £1.5 million.

First-time buyers will now pay no stamp duty on a property up to the value of £425,000, up from £300,000, and the Government has also increased the value of a property first-time buyers can claim relief on from £500,000 to £625,000. With the rise in house prices over the last two years, this comes as welcome news.

The Treasury estimates that with these increases, each year, 200,000 more people will be able to buy a home without paying any stamp duty.

Savings and investments

The mini-budget saw no specific announcements for savers and investors, but both will certainly have been affected by the budget and Bank of England changes last week.

With the interest base rate now raised to 2.25%, savers will see a small increase in any interest tied savings products. Unfortunately, with inflation still increasing, the overall value of cash savings will continue to eroded.

The announcements of broad tax cuts in the mini-budget have also seen the pound reach a low of 1.07 against the US dollar, which is already affecting the UK bond markets.

Savers and investors will need to watch the markets closely over the coming months to see if Chancellor Kwarteng’s growth plans pan out. As always, investing with longevity in mind will be the best approach to weather any short-term storms.

Top rate tax payers and personal savings allowance

For those earners who currently fall into the 45% tax rate band, the scrapping of this rate will mean a return of the personal savings allowance of £500 per tax year. This means higher earners will be able to earn up to that amount in savings interest without it being taxed. At this rate, an individual would need £10,000 in savings before the personal savings allowance comes due.

*note that savings tax rules are different in Scotland and any savings over £85,000 in the same account or with the same banking group won’t be protected.

PLEASE NOTE: Grosvenor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. The value of investment can go down as well as up and you may not get back the original amount you invested. Tax treatment is dependent on individual circumstances and may be subject to change. Tax planning is not regulated by the Financial Conduct Authority.