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The Autumn Budget: What it means for you and your finances

by Madaline Dunn

In his first speech as Prime Minister, Rishi Sunak said the country was “facing a profound economic crisis.” Following this, it was announced last week that the country had officially entered a recession. This means there has been a prolonged downturn in economic activity and a fall in GDP for two successive quarters.

In the wake of this news, the new Chancellor, Jeremy Hunt, warned that “decisions of eye-watering difficulty” are ahead and that the government will be asking “everyone for sacrifices.” He subsequently announced the long-awaited Autumn Budget, detailing a wide range of tax rises and spending cuts. After this announcement, the pound fell 0.9%.

At The Salary Calculator, we know that this is an incredibly challenging time for millions of people, and it’s likely that you’ll have a lot of questions about what the budget means for personal finances. So, we’ll walk you through the changes likely to impact you. This includes:

• What changes are upcoming
• When these changes will take effect
• Cost of living payments
• The impact the changes will have on take-home pay
• What’s happening with benefits
• Helpful resources to cope with the cost of living crisis

What changes are coming up?

In the Chancellor’s budget statement, he made a number of announcements in regard to National Insurance (NI), Income Tax, Pensions, and more. This included:

• That income tax personal allowance will be frozen at £12,570 until April 2028, in addition to a freeze on the Basic Rate.
• The threshold for paying the 45p rate has also been lowered to £125,140 from the existing £150,000, bringing an additional 246,000 people into the bracket. Those within the bracket will now pay an extra £580 each a year, equating to an additional £1.3 billion a year for the Treasury.
• The main NI thresholds will remain frozen until April 2028.
• The pension triple lock (frozen during the pandemic) will come in, meaning that the State Pension will increase in line with whichever of the following three is highest:

-Inflation

-The average wage increase

-2.5%

• The National Living Wage (NLW) will be increased by 9.7% from £9.50 an hour for over-23s to £10.42: an annual pay increase of over £1,600 for a full-time worker.
• Young workers and apprentices on the National Minimum Wage (NMW) rates will also see their wages slightly boosted. Those aged 21-22 will see an increase of 10.9% to £10.18 an hour, while for those aged 18-20, their wages will increase by 9.7% to £7.49 an hour. Those aged 16-17 will see their wages increase by 9.7% to £5.28 per hour, and the same for Apprentices: an increase of 9.7% to £5.28 an hour.

Speaking about the changes brought in under the budget, Hunt said the government is taking “difficult decisions on tax-free allowances.” Adding: “I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”

When will the changes take effect?

Although the Chancellor announced the budget on the 17th of November, the changes will take effect from April 2023, affecting around 19 million families.

Will cost of living payments continue?

The government has announced additional cost of living payments will be made throughout 2023-24. This means that:

• If your household receives means-tested benefits, you will receive an additional £900 payment.
• You will receive an additional £300 payment if you live in a pensioner household.
• If you are an individual on disability benefits, you will receive an additional £150 payment.

What impact will the changes have on take-home pay?

While there will be a continuation of cost of living payments, freezes on NI and Income Tax payments for those on lower incomes, and an increase in the NLW, according to statistics experts, the announcements from the budget statement mean that you’ll likely be worse off.

Discussing what this means in real terms, Robert Cuffe, a statistics expert at the BBC, explained that if you’re one of the lucky ones to receive a pay rise that “just about keeps pace with inflation” in April 2023, while your pay cheque will be bigger because prices have risen as much as your salary, you won’t be better off. Cuffe outlined that if you’re a basic rate taxpayer, the government will take around £300 out of your increased wages, and if you’re a higher rate taxpayer, this jumps to £670.

To better understand how the budget changes will directly affect you and your finances, head over to The Salary Calculator’s Take Home Tax Calculator.

What’s happening with benefits?

In the budget, it was outlined that benefit rates will increase in line with inflation, equating to an increase of 10.1% this year. So, for families, the benefit cap will increase from £20,000 to £22,020 (and in Greater London, £23,000 to £25,323). Meanwhile, for single adults, the benefit cap will rise from £13,400 to £14,753 (£15,410 to £16,967 in Greater London).

With regard to those on disability benefits, there is a new Disability Cost of Living Payment. So, according to the government, more than six million people across the UK on non-means-tested disability benefits will receive a £150 Disability Cost of Living Payment. Those eligible for this cost of living payment include those currently receiving:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Scottish Disability Benefits
• Armed Forces Independence Payment
• Constant Attendance Allowance
• War Pension Mobility Supplement

Resources to help during the cost of living crisis

It’s understandable to have concerns about the cost of living crisis and personal finances, but there are some resources available to help you navigate these difficult times. We’ve shared some of these resources below:

Local government support: https://www.local.gov.uk/our-support/safer-and-more-sustainable-communities/cost-living-hub

Unbiased: https://www.unbiased.co.uk/pages/hub/cost-of-living-hub

Citizen Advice: adviceguide.org.uk

Local Energy Advice Partnership: https://applyforleap.org.uk/

Trussell Trust for UK food banks: https://www.trusselltrust.org/get-help/find-a-foodbank

The Community Fridge Network (not means-tested): https://www.hubbub.org.uk/the-community-fridge

Stonewall Housing: stonewallhousing.org

Street Link: https://www.streetlink.org.uk/

My Supermarket Compare: https://mysupermarketcompare.co.uk/

Save the Student: https://www.savethestudent.org/save-money/money-saving-resources.html

Tags: budget, Economy, income tax, national insurance, national minimum wage, Pensions, triple lock

Credit scores unpacked and myths debunked

by Madaline Dunn

With the cost of living crisis shooting up rent, food and fuel prices, an increasing number of people are turning to loans, credit cards, and overdrafts. Of course, a good credit score is often required to qualify for a low-interest-rate loan, so many people are now trying to determine what their credit score is and find ways to improve it. In fact, MoneySuperMarket’s data reveals that searches for ways to increase credit scores have increased by 506% in the last ten years alone.

However, despite so much hinging on a credit score, many people in the UK believe that the current system is not “fit for purpose.” Nearly 40% (39%) of people believe it’s unfair to judge a person based on financial decisions that they made up to five years ago, while 38% believe that credit scores don’t reflect their current livelihood and 34% believe that credit scores, in general, aren’t a good measure of a person’s creditworthiness. In general, credit scores can cause people a lot of concern and there are a lot of myths and misconceptions out there.

At The Salary Calculator, in this article, we’ll:

• Explain what a credit score rating is
• Dispel some of the myths that exist around credit scores
• Explore some of the ways you can improve your credit score

What is a credit score rating?

A credit score rating, at its core, is a way of measuring how much of a risk a person is when it comes to lending them money. FICO and VantageScore are the two main consumer credit scoring models, while Experian, TransUnion, and Equifax are the three national credit bureaus that offer different ratings. The former, for example, considers anything above 881 to be a good score, while the latter considers anything above 531 ‘good.’ TransUnion, on the other hand, considers scores above 720 a good rating.

A credit score rating is determined by a number of different factors, including:

• Your payment history – This means looking at whether you pay your bills on time and whether you’ve ever filed for bankruptcy. This is arguably the most important factor considered when calculating your score.
• Credit usage – This includes how much you owe in loans and how many of your accounts have balances.
• Length of your credit history – Money lenders like to see that you have a long history of paying on time.
• New credit – Applying for new credit can lead to a hard inquiry and lower the average age of your accounts.

Myths and misconceptions

When it comes to credit scores, many people are truly in the dark, and due to the myths and misconceptions floating around, just the mention of credit scores can cause people to spiral. Below we’ve compiled a list of the top myths:

Checking your credit score will negatively impact it – False

You can check your credit score as much as you like without it negatively affecting it. In fact, it can even be an indicator of financial responsibility.

Your credit score is impacted by your income – False

Your credit score is not impacted at all by your income and, in fact, only considers information found in your credit report, so, as outlined above: Your payment history, credit usage and length of your credit history. That said, if you were to lose your job or take an earnings hit, this could affect your rating indirectly in that it could detrimentally impact your ability to pay back your loans.

Paying off debt means it won’t affect your credit score – False

Unfortunately, even if you’re proactive in paying off your debt, the record of it can remain in your credit history for seven to 10 years.

My loan application will be rejected if I have a low credit score – Not always

You won’t always get a loan application rejected if you have a low credit score. However, you might be offered higher interest rates or a smaller loan.

How can you improve your credit score?

If you have a low credit score and you’re concerned that it’s going to detrimentally impact your future financial decisions, don’t worry, there are a few things that you can do to boost it.

First of all, it’s a great idea to keep up-to-date with how things are looking, so the experts suggest signing up with a tool like MoneySuperMarket’s Credit Monitor. This way, you’ll be able to check whether or not you’re veering into the red, and employ some of the below steps to steer you back on track.

Likewise, it’s important to keep your accounts up-to-date. So, if you’ve got an old bank account that hasn’t been used for years, it’ll be better for your rating if you close it. On the other hand, keeping open a bank account that you regularly use will positively impact your credit score.

Of course, paying bills on time is a big must for boosting your credit score, but be sure to check which ones count towards it – as only some of them do. And, also don’t forget to try and keep balances low on your credit cards, and try your best to pay more than the minimum required on your credit card, too.

Tags: Credit card, Credit score, Economy, Loans

Foreign exchange rates and their impact on goods and services in light of the pounds drop

by Madaline Dunn

In more bad news for the UK, last week, the pound fell again, following announcements by the Bank of England (BOE) that it would not extend emergency support. With the pound yo-yoing so dramatically many people are concerned about the wider impact of the pound’s drop in value and it’s likely you’ll have some questions.

At The Salary Calculator, we’ll walk you through:

• The current state of the pound
• What this means for consumers

The state of the pound

There are a number of different reasons behind the pound’s recent plummet, and although the new Prime Minister, Liz Truss, has been vocal about blaming the fallout from the Russia-Ukraine war, considerable blame rests with the announcement of the mini-budget.

As the news of Chancellor Kwasi Kwarteng’s economic plan spread, the pound dropped to record lows, and while it’s true to some extent, as Truss said, that “currencies are under pressure around the world,” the depreciation of the pound, to this extent, is unprecedented.

The pound fell sharply again after Andrew Bailey warned that the Bank of England would not extend its emergency intervention in financial markets. To help soften the blow, many had been advising Truss to do a complete U-turn on the mini-budget’s unfunded tax cuts – the International Monetary Fund, for example, stated that this would “change the trajectory” of interest rates. On Friday, it was announced by Truss that this U-turn would go ahead, alongside the firing of Kwarteng, which caused the pound to fluctuate once again.

What does the pound’s fall mean for consumers?

When it comes to the pound’s fall and its impact on exchange rates, consumers will feel the effect in that their money won’t go as far when paying for imported goods and services, such as oil. While oil has returned to pre-Ukraine war levels, due to oil being priced in dollars, for the time being, you’ll be paying more for topping up your car.

Speaking about oil’s price hike, Bestinvest’s Alice Haine says: “As with most major commodities, oil is priced in dollars which means filling up your car will be more expensive.” Adding: ‘The price consumers pay in the UK is still relatively high because of weakness in the pound.”

When it comes to food imports, while most people believe that around 50% of food is imported, some food analysts estimate that the UK actually imports much more, around 80% of its food. However, a significant portion of these food imports come from the EU, and considering, as Haine outlines, the Euro is down against the Dollar, the price increase will likely be less “dramatic” than oil’s price hike. That said, times will still be tough for importers, especially considering that the pound’s fall follows the challenges that came with Brexit, Covid, a global logistics crisis, rising energy bills and industrial action.

Although fewer people will be travelling abroad this Autumn/Winter, there are some that might be travelling for work or fancy a getaway when fewer people are holidaying. As an ABTA (Association of British Travel Agents) spokesperson told Euronews Travel, surprisingly, there’s still a lot of “pent up demand” for overseas travel after the last few years of travel restrictions, and due to customers deciding that holidays are “one of the last things they will cut back on when” looking to ease financial pressures. For those travelling within Europe, while activities and dining out won’t be affected as much, the plane ticket you purchase might be higher, due to aviation fuel and aircraft leases generally being priced in US dollars, and airlines outside the US having to pay more to refuel, something which is passed onto the customer. Travelling to the US, however, will be more expensive, as will trips to places such as Dubai and Barbados, as they also have their currencies pegged to the Dollar.

Tags: Bank of England, Economy, exchange rates, sterling

The Winter Fuel Payments

by Madaline Dunn

There’s no denying that times are hard right now. On top of this, the winter months can be the most difficult time of the year, with much higher energy demands.

Fuel Poverty Action, a grassroots campaign striving to bring an end to fuel poverty, has even warned Prime Minister Liz Truss that tens of thousands will be at risk of death without serious intervention around the cost of living crisis. The campaign organisation has specifically called for a basic level of energy for every household, enough for people to maintain enough heating, lighting, cooking, and other essential services.

The government is yet to introduce this kind of scheme but has brought in a number of other financial aid schemes.

One of these schemes is Winter Fuel Payments, an initiative that was brought in back in the late nineties but has received a boost in response to the crisis. At The Salary Calculator, we’ll explore:

• What the Winter Fuel Payments are, and who is eligible,
• How much you receive and when you will receive the payments,
• How the payment will be issued,
• Whether there is additional help out there to help with the cost of living.

What are Winter Fuel Payments and who is eligible?

The Winter Fuel Payments were launched back in 1997 and were introduced in order to assist older people with fuel payments in the colder months. However, in order to be eligible for this financial assistance,  there are a number of conditions that must be met:

• You must have been born on or before September 25, 1956.
• You have to have lived in the UK for at least one day during the week of September 19 to 25, 2022.

That said, if you can not meet the second condition and did not live in the UK during the qualifying week, you could still be eligible if you can fulfil the following criteria:

• You live in Switzerland or a European Economic Area (EEA) country,
• You have a “genuine and sufficient link to the UK” (this includes having lived or worked in the UK previously or having family in the UK.

You will not be eligible, however, if any of the following applies:

• You are in hospital and have been receiving free treatment for over a year,
• You require permission to enter the UK,
• You were in prison for the whole week of September 19 to 25, 2022
• You lived in a care home between June 27 and September 25, 2022, and received certain benefits.

How much will you receive and when will you receive the payments?

When it comes to Winter Fuel Payments, you could receive between £250 – £600 to help pay your heating bills, and the amount you will receive is dependent on a number of factors, including:

• How old you are,
• Whether you live alone,
• What benefits you receive.

This year, the amount you will receive includes a Pensioner Cost of Living Payment worth between £150-£300. The amount you receive will be tax-free and paid in addition to any other Cost of Living payments. These payments will also not affect the other benefits that you’re eligible for.

How will the payment be issued?

According to the government, while most payments will be issued in November or December, pensioners should be paid by January 13, 2023. Government advice is for recipients to check their account between November and December to review whether or not they have been paid.

Although the process should take place automatically, if you have not received a payment and you are eligible, directly contact the Winter Fuel Payment centre to report the issue.

For more information about the payment scheme, head over to the Gov.uk website.

Is there other help out there?

Although this particular initiative only applies to older adults in the UK, there are further initiatives for people struggling with the cost of living crisis. This includes:

• The Energy Bills Support Scheme: A non-repayable government discount of £400 made in six instalments from October 2022 to March 2023 (£66 in October and November and £67 in December, January, February and March.
• The Warm Home Discount Scheme: A £150 discount on energy bills for those receiving certain benefits.
• Fuel vouchers: For those on prepayment metres.

For more help and advice around the cost of living crisis, visit the Citizens Advice website.

Tags: cost of living, Economy, Financial aid, Pensions, Winter Fuel Payments

The cost of living crisis: Working from home versus at the office

by Madaline Dunn

The working from home revolution has brought many people flexibility, more job satisfaction and savings; however, as the cost of living crisis bites, some are starting to weigh up whether it’s still a better option than in-office working. As the winter months draw nearer, some think that returning to the office might help them save money.

At The Salary Calculator, we’ll explore:

• The current cost of living crisis and employment trends,
• The cost of working from home,
• Whether working from the office can save you money.

Cost of living hike and employment trends

According to figures from the ONS, around 40% of adults in Britain now work in a hybrid working model, with 30% of the UK workforce working from home at least once a week – 8% of workers didn’t even step foot in the office for the entirety of 2021. Research from last year also found that around 70% believed that workers would never return to the office in the same way ever again, with the majority expressing a preference to work from home either full-time or “at least some of the time.”

However, this was before the cost of living crisis had taken a turn for the worst. Now, around 89% of adults (46 million people) report that their cost of living is continuing to increase. While almost everything is on the rise, with Citi investment bank warning that inflation could exceed 18% in January, rising heating costs are for may their primary concern. It’s not surprising considering that the energy price cap was due to reach £3,549 a year in October. However, the new Energy Price Guarantee means that a household with average usage will pay £2,500. This means that the 80% rise in energy bills that was due to come into effect on 1 October will be avoided, but many will still be faced with bills they can’t afford.

As Paul Johnson, director of the Institute of Fiscal Studies (IFS), says, the energy freeze is “very poorly targeted” and one that will benefit “better-off people.” This was echoed by Torsten Bell, the Resolution Foundation’s chief executive, who said, despite the support being “big” and “bold,” families should still expect a “tough winter ahead, with rich households getting twice as much cost-of-living support as poorer households next year.”

Experts forecast that without the government intervening, the number of UK households in fuel poverty could reach 12 million by January, with The End Fuel Poverty Coalition highlighting that 42% of households will be unable to afford adequate heat and power from January. The situation is so dire that the head of the World Energy Council (WEC) has said that the UK will have to begin to develop a spirit of “radical generosity” in order to prevent the loss of lives.

With energy becoming so expensive, it appears that the trend of working from home may phase out. So let’s break it down – which option is cheaper?

The cost of working from home

According to Uswitch, by winter, those working from home, rather than the office five days a week, will use around 75% more gas each day and 25% more electricity. Analysis from New Statesman’s business editor Will Dunn also found that poorly insulated homes in the UK could cost over £30 a day to run. Considering that a study conducted by EDF in partnership with property data platform, Sprift, found that only 58% of the 21 million homes across England and Wales studied meet insulation standards of 1976 or earlier, many people will find themselves paying more.

Specifically, research shows that from 1 October, a large 32kW boiler will cost £4.80 an hour to heat, boiling a kettle will cost 10p, and running a desktop PC and monitor will add £1.25 a day at the new rate of 52p per kilowatt hour. However, on the childcare front, while not always ideal, working from home can mean that you pay less in childcare costs.

Speaking about this, Uswitch energy spokesman Ben Gallizzi said: “Using extra energy when the heating would usually be off will be especially noticeable on bills this year with prices rising by 80%.” Adding: “Not only do people working from home use more energy staying warm, they are also cooking lunch and making cups of tea, as well as running computers, TVs and phone chargers.”

Can working from the office save you money?

Many of those working from home are beginning to feel the pinch, and research from MoneySupermarket.com shows that now around 14% plan to head to the office more often to help save on energy bills. Interestingly, this figure rises to 23% for those aged 18-24 years old.

That said while returning to the office means you’re likely to save on energy bills, it will cost you in other respects. Working from the office means travelling in, and transport costs are currently also pretty high. 

If one travels by car, factoring in Confused.com’s estimate that the average daily commute equates to 5,040 miles a year, and NimbleFins estimation that the real total cost per mile of driving is roughly 47p, this means annual commuting costs will reach around £2,370.

If you don’t drive, travelling by train can be equally, if not more expensive than driving. New rail fares mean that the current price of the typical annual rail season ticket is £3,263, which is due to rise further by £433 next year. Meanwhile, The Times reported that a return journey from Reading to London would see commuters pay £4,860 for an annual season ticket, which is also £93 a week. The paper made a point to outline that this doesn’t factor in additional costs, for example, buses, Ubers and taxis from the station to your place of work. A monthly Oyster Travelcard for TfL services, for example, costs between £147.50 to £270 per month.

For parents considering returning to the office, it’s also important to take into consideration childcare costs. Childcare can be expensive, with research from the Coram Family and Childcare charity finding that the average price for children under two in a part-time nursery sets parents back around £138.70 a week. Money Helper reveals similar figures, with a full week of childcare costing £263.81 a week, which, over 39 weeks, reaches £10,289.

Final thoughts

With so many variables to factor in, the best way to determine what will be best for you and your finances is to review your bank statements and reflect on where you can make savings. If you’re able to travel to work via a less expensive medium of transport, pack your own lunches, and, if you have children, find suitable and affordable childcare, returning to the office might work in your favour.

However, if you live a significant distance away from your workplace’s office and would have to use public transport for travel, it might be best to continue as you are. Moreover, there are some hints and tips that can help you save energy when working from home, for example:

• Turning your appliances off at the mains can save you £55 a year,
• Ensuring you turn off the lights in rooms you’re not using can save you £20 a year,
• Switching to energy-saving light bulbs can save you £13 per bulb per year,
• Turning your thermostat down by just 1 degree can save you £150 a year,
• Only filling the kettle with what you need can save you £36 a year,
• Covering your pans with lids means your food will cook quicker, and you’ll use less energy – likewise, if you’ve got electric hobs, make sure to keep them clean; dirt and grease will make them less energy efficient.

While these savings may seem small in the grand scheme of things, they will all add up and leave you with more money than you expected while exerting minimal effort.

Tags: cost of living, Economy, Jobs, Working from home