Martin Lewis issues demand to Chancellor on four big money issues to help parents, carers and first-time buyers
MARTIN Lewis has written to Chancellor Rachel Reeves, demanding change on four big money issues.
In the letter, the founder of MoneySavingExpert.com outlines several key areas that he believes could be improved without significant expenditure.
The letter, which was sent today, highlights non-partisan issues that Martin considers “sensible and urgent”.
Among the key concerns are the high-income child benefit charge, the carer’s allowance cliff-edge, the renaming of tax-free childcare, and the “flawed” lifetime ISA (LISA) system.
He said that the issues were previously discussed with the former government and the then-shadow team.
Martin also covered his views on student loans, financial education, mortgage prisoners and buy now, pay later.
Here’s everything he proposed.
HIGH-INCOME CHILD BENEFIT CHARGE
Martin argues that the high-income child benefit charge penalises single-income families.
If either your or your partner’s income is over £60,000 a year, you have to pay the charge.
It doesn’t matter who in a couple reaches this threshold, at this point the claimant will still have to start paying some of the benefit back.
Martin cites the case of a single father who, after the tragic loss of his partner, struggles with the financial burden despite earning a salary that disqualifies him from child benefit.
He’s urged the Chancellor to continue the review initiated by her predecessor, which aims to shift the assessment basis to household income as opposed to individual income.
Martin added: “This is an issue I received an unprecedented volume of correspondence from the public about, it impacts huge numbers of people, and many care deeply about it.”
CHILD BENEFIT
CHILD benefit is paid to parents to help cover the costs of childcare.
It is paid at two weekly rates – £25.60 for your eldest or only child and £16.95 for any additional children.
If you are claiming child benefit for a child under 12, you also receive National Insurance (NI) credits.
NICs count towards your state pension so claiming the benefit can be useful if you are missing any.
Since 2013, if you or your partner earns over a certain amount, you also have to start paying some child benefit back.
Go over a second threshold and you have to pay it back in its entirety.
This is through what’s known as the high-income child benefit charge (HICBC).
The threshold at which you have to start paying money back is now £60,000.
The rate at which you have to pay the entire allowance back is £80,000, which recently increased from £60,000.
It’s up to you to pay the charge, though, and if you don’t, you can be stung with a nasty bill.
CARER’S ALLOWANCE CLIFF-EDGE
Martin argues for the overhaul of the “unfair” structure of the carer’s allowance, which leaves many unpaid carers – whom he describes as “unsung national heroes” – struggling.
The current system disqualifies carers from receiving the allowance if they earn just a penny over the £151 per week threshold.
Instead, he’s urged the Chancellor to end this cliff-edge system and suggests implementing a taper similar to other benefits like Universal Credit.
In this scenario, instead of losing your full allowance once you hit the threshold, you’ll slowly have your payments reduced until you hit a higher threshold at which you’ll no longer qualify.
CARER'S ALLOWANCE
CARER'S allowance is paid to those providing at least 35 hours of unpaid care a week, in most cases to disabled or sick relatives.
It is paid at a weekly rate of £81.90 and anyone on the benefit is allowed to have a second income from a job.
However, you can’t earn more than £151 a week, or you lose all of your benefit allowance.
The DWP, which pays the benefit, also looks to get any overpaid benefits back.
However, in some cases, DWP’s systems don’t flag earnings limit breaches for several years, so people are overpaid massive sums that have to be repaid.
Ten of thousands on the benefit are having to pay back as much as £20,000 after unknowingly breaching government rules.
If you don’t engage with the repayment process, you can even be taken to county court.
LIFETIME ISA PENALTY
In addressing the housing crisis, Martin highlights the outdated £450,000 house price limit for Lifetime ISAs, which has remained unchanged since 2017.
He said that many first-time buyers, especially in London, are penalised for withdrawing their own savings to purchase homes exceeding this limit.
Martin proposes a reduction in the withdrawal penalty from 25% to 20% for properties above the threshold, allowing savers to access their funds without incurring fines.
LIFETIME ISAs
FIRST-time buyers saving into a LISA can stash up to £4,000 into this account each year tax-free.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
For example, if you save £4,000, you’ll get a £1,000 bonus.
The amount you pay is linked to your annual ISA allowance (£20,000 for 2024/25) – for example, if you pay £1,000 into your LISA, you can still pay £19,000 into other ISA products.
Any bonus you earn doesn’t count towards your ISA allowance.
If you want to use a Lifetime ISA to buy a home, there are a few restrictions you need to keep in mind:
- Only first-time buyers can use Lifetime ISAs to buy a home, which means you can’t own, or have owned, a home in the UK or anywhere in the world.
- You’ll need to be buying a home for no more than £450,000.
- You must be buying a home you plan to live in – the scheme isn’t for buying a home you want to rent out, or a holiday home.
If you don’t use it to buy your first home, you can continue paying into a LISA until you’re 50.
You can then make full or partial withdrawal from your LISA, without paying a fee, when you turn 60.
RENAMING TAX-FREE CHILDCARE
Martin Lewis has also called on Rachel Reeves to rename tax-free childcare.
The scheme rewards parents with £2 for every £8 they pay into a tax-free childcare account.
You can get up to £500 from the Government every three months – up to a maximum of £2,000 a year – for each of your children.
If your child is disabled, you can claim more – £1,000 every three months, up to £4,000 maximum per year.
To qualify, both you and your partner (if you live together) must be working at least 16 hours a week, on minimum wage — which means you must both earn at least £2,379 every three months.
However, Martin argues that the scheme’s current name is misleading and has resulted in low uptake among eligible families.
Based on new research, he suggests renaming it to “The Working Parents’ Childcare Top-up” to improve understanding and increase participation.
OTHER CONCERNS
Martin also argued that other areas require attention, including the inadequacy of English student maintenance loans, the need for comprehensive financial education in schools, the plight of mortgage prisoners, and the urgency of regulating buy now pay later products.
Beleaguered plans to regulate BNPL products have been repeatedly postponed since the Government first announced them in 2021.
It is understood that Labour plans to address BNPL regulation as quickly as possible.
However, even if work began on the policy from day one of government, which insiders say is “unlikely”, it would take at least another year for any new rules to come into effect.
This is because while the Treasury is responsible for drafting any new legislation, the City watchdog, the Financial Conduct Authority (FCA), would be responsible for regulating the products.
So, once the plans are finally legislated through parliament, the FCA will still have to create the regulations and run a consultation with the BNPL industry.
It will then need to give firms time to implement any changes.
Martin has also called for the introduction of rules to prevent lenders from bombarding people with letters, calls, texts and emails about missed payments.
He said: “50% of people who are behind on bills have felt suicidal due to rising costs, but unlike in other countries such as the USA, there are no firm legal rules here limiting how often creditors can contact people about missed payments.
“A proper limit and rules would align neatly with your focus on boosting consumer protections in financial services.”