By Fatma Younis
Money expert Martin Lewis has delivered his verdict on the first Autumn Budget under Prime Minister Andy Burnham, highlighting three significant takeaways from Chancellor John Healey’s statement. While Lewis expressed disappointment over the lack of action on frozen tax thresholds, he welcomed a reduction in the Lifetime ISA withdrawal penalty.
Energy support and fiscal challenges
The Budget included a £100 energy bill support payment for around 20 million households this winter, alongside tax breaks for high street businesses and the scrapping of the gas standing charge to benefit lower-income households. Healey told MPs the UK faces a “global economic storm,” with the Office for Budget Responsibility cutting its GDP growth forecast for next year. Public finances have been strained by soaring borrowing costs, with the UK spending £14 billion more on debt interest this year.
Income tax freeze continues
Lewis noted that income tax bands remain frozen, extending the “fiscal drag” that pulls more earners into higher tax brackets as wages rise. The personal allowance has been frozen at £12,570 since 2022, and the previous chancellor, Rachel Reeves, extended the freeze to 2031. “No news here, fiscal drag stays,” Lewis said after Healey’s statement.
Student loan threshold unchanged
The freeze also affects graduates on Plan 2 student loans, who face a “double fiscal drag.” Their repayment threshold is fixed at £29,385 until 2030, meaning pay rises push more income above the line, subjecting a larger portion to the 9% repayment rate.
Lifetime ISA penalty cut
Lewis said he was “delighted” that the government will reduce the Lifetime ISA withdrawal penalty from 25% to 20%. The scheme helps first-time buyers by adding a 25% bonus to savings up to £4,000 per year. The previous 25% penalty effectively charged savers 6.25% on withdrawals. Lewis called the change a “great relief to many young people,” though the implementation date remains unclear. Healey also confirmed a new ISA for first-time buyers will eventually replace the Lifetime ISA, but that work will take several years.
