National Insurance and Childcare: Budget Measures Analysed

The Spring Budget’s centrepiece is the further reduction of National Insurance contributions (NICs) for employed and self-employed individuals. This builds upon the 2p cut announced in late 2023, resulting in a total decrease of 4p. This effectively mirrors an income tax cut, putting more money back into people’s pockets. This combined cut and the previous one marks the lowest personal tax rate in the UK since the 1970s.

The impact of this cut varies depending on income. Individuals earning £20,000 per year can expect to save around £149 annually, while higher earners exceeding £60,000 will see a saving of approximately £754 per year. This could provide financial relief and boost disposable income, potentially stimulating consumer spending.

The budget also aims to support working parents by expanding access to free childcare. The government projects that this initiative will incentivise 60,000 additional parents to enter the workforce by 2028. To achieve this, the Chancellor proposed exploring a shift in eligibility criteria, potentially considering collective household income instead of individual income to assess access to childcare support.

While implementation is not expected until April 2026, the budget offers immediate relief by raising the income threshold for free childcare eligibility from £50,000 to £60,000. The upper limit for the taper rate, at which free childcare support gradually decreases, will increase to £80,000. These changes aim to make childcare more affordable for a broader range of families and encourage greater parental participation in the workforce.

While the reduction in national insurance offers some tax relief, its long-term impact on the economy and individual circumstances remains to be seen. Though promising for increasing workforce participation, the proposed childcare measures will take time to implement and require further analysis to understand their full impact.


Multiple Dwelling Relief, Capital Gains Tax, and Holiday Lets: Budgetary Shifts in the Housing Market

The Chancellor announced the abolition of Multiple Dwellings Relief (MDR), which previously offered a stamp duty tax break for individuals purchasing multiple properties in a single transaction. Citing misuse within the buy-to-let sector, the government argues that MDR has deviated from its original purpose of incentivising bulk purchases for buy-to-let portfolios. While this elimination translates to increased costs for buy-to-let investors, the budget offers a potential counterbalance.

In what could be a measure to offset the MDR removal, the Chancellor has announced a reduction in capital gains tax (CGT) for property sales. The higher rate of CGT, applicable to additional properties and higher-rate taxpayers, has been reduced from 28% to 24%. This move aims to incentivise property transactions, potentially increasing market activity and generating additional tax revenue through increased sales volume. However, concerns remain that this benefit may primarily cater to wealthier property owners, potentially exacerbating existing inequalities in the market.

The budget also proposes eliminating the Furnished Holiday Lettings (FHL) system. This system currently offers tax benefits to property owners who rent their properties to holidaymakers. The government argues that these tax breaks incentivise owners to prioritise short-term rentals over long-term tenancies, contributing to the ongoing housing supply shortage. By abolishing FHL, the government hopes to encourage owners to shift their focus towards long-term rentals, potentially increasing options for traditional tenants and easing market pressures.

These measures represent a mixed bag for the housing market. While the MDR removal and FHL abolition aim to address specific concerns about market imbalances, it remains to be seen whether these changes will achieve their intended goals without unintended consequences. The CGT reduction might stimulate activity, but its potential impact on affordability and market equality is a concern.

Inflation and Levelling Up

The good news on the inflation front is that it has fallen to 4%, with the Office for Budget Responsibility (OBR) predicting it will reach the government’s 2% target within two months. This signals a return to more stable market conditions, which could benefit the housing market in the long run. While traditionally high inflation leads to stagnant house prices, a return to controlled inflation might moderate price growth, potentially benefiting investors.

The budget reaffirms the government’s commitment to the Levelling Up agenda, allocating £20 million to support community-led housing initiatives. These investments target specific regions like Sheffield, Blackpool, London’s Canary Wharf, and the West Midlands Combined Authority. This focus on regional development aims to address geographical imbalances in housing affordability and availability, potentially contributing to a more equitable and balanced housing market across the UK.


*Photo from the Parliament Website. Licence here

Stamp Duty

While the Spring Budget addressed various aspects of the housing market, it failed to deliver a key proposal anticipated by many: the extension of the current, higher stamp duty thresholds beyond their March 2025 expiration date. This temporary increase, introduced in September 2022, aimed to ease the financial burden on homebuyers by raising the threshold at which stamp duty becomes payable.

The call for permanent reform of the stamp duty system, particularly the extension of these temporary thresholds, stemmed from concerns about its impact on market mobility. Critics argue that with its “cliff-edge” approach, the current system discourages movement within the housing market, as individuals face significant tax increases when purchasing properties exceeding the current thresholds.

The budget’s silence on this issue leaves many disappointed, particularly first-time buyers and those considering upsizing or downsizing. With the temporary thresholds set to revert to their pre-September 2022 levels in March 2025, a more significant portion of the population will be subject to higher stamp duty rates, potentially hindering their ability to move and impacting overall market fluidity.

While the possibility of addressing this issue remains during the Autumn Budget, the lack of immediate action in the Spring Budget leaves a sense of missed opportunity, leaving the burden of potentially higher stamp duty payments looming for many prospective homebuyers in the near future.


What the Spring Budget Didn’t Address

While the Spring Budget unveiled various measures, some key proposals for the housing market were noticeably absent. Notably missing were:

  • 99% Mortgages: The highly anticipated reintroduction of 99% mortgages, which was initially considered, did not materialise. Concerns from industry professionals regarding potential market overheating and echoes of the 2008 crisis have played a role in this exclusion.
  • Income Tax Reduction: Hopes for a direct income tax cut were also unfulfilled. Instead, the government opted for a 2p reduction in National Insurance and a capital gains tax decrease, aiming to achieve similar financial relief without significantly impacting the treasury.


The absence of these measures, particularly the 99% mortgage scheme, leaves a gap in addressing first-time buyers’ challenges. While the budget offers some indirect benefits through the National Insurance reduction, the need for a targeted solution for those struggling with smaller deposits continues to be a pressing concern. The budget fails to address the need for further innovation in mortgage products and support mechanisms to facilitate easier entry into the housing market for this segment of buyers.

While the budget acknowledges the need for intervention in the housing market, the missing elements leave room for further action and innovation to address the specific needs of first-time buyers and ensure a more inclusive and accessible housing market in the long run.