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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

How the budget will affect personal finance

by Madaline Dunn

Chancellor Rishi Sunak recently delivered his “wide-ranging” 2021 Budget, and personal finances will be affected in a number of ways. From the national minimum wage to the price of a pint, millions will see changes to the amount of money in their pockets.

So just what is changing? At The Salary Calculator, we’ll give you the rundown. In this article, we’ll explain:

• What changes are being made to the National Minimum Wage and the Living Wage
• How much money will those who claim Universal Credit take home
• What’s going on with alcohol duty
• How travel costs will change

National Minimum Wage and Living Wage changes

The UK’s National Minimum and Living Wage are set to rise, and these changes will come into effect in the next tax year, in April 2022.

The National Living Wage, which refers to the minimum wage those aged 23 and over can earn an hour, will increase by 6.6% from £8.91 to £9.50 an hour. The National Minimum Wage, meanwhile, will increase from £4.62 to £4.81 for those under the age of 18, and from £6.56 to £6.83 for those aged 18 to 20.

Those aged between 20 and 21 will also benefit from a slight increase, with hourly wages rising from £8.36 to £9.18.

Those working as apprentices will see a small increase in their take-home pay, too, with hourly pay increasing from £4.30 to £4.81.

Although Sunak has said that this increase “ensures “the government is “making work pay” and “keeps us on track to meet our target to end low pay by the end of this parliament.” That said, if you think that this wage increase isn’t enough, you’re not alone.

Bridget Phillipson, the shadow chief secretary to the Treasury, has said that the increase is “underwhelming” and, in fact, works out as “£1,000 a year less than Labour’s existing plans for a minimum wage of at least £10 per hour for people working full-time.”

Adding: “Much of it will be swallowed up by the government’s tax rises, universal credit cuts and failure to get a grip on energy bills.”

Similar sentiments have been expressed by the Institute for Fiscal Studies, which has said that the increase won’t be truly felt due to inflation.

Universal credit take home

Following the government’s cut to the Universal Credit boost, which benefited 5.5 million people, Sunak announced there will be changes to the amount of money claimants take home.

Under the current taper rate, for every £1 earned above a threshold for the benefit, a worker misses out on 63p. This is being cut by 8%, meaning it now rests at 55%, down from 63%.

So, according to the government, that means that Universal Credit claimants will keep more of their payment when they find work or receive an increase in their hours. That said, this change benefits just a third of claimants who are worse off since the £20 cut.

The price of a pint

Considering the increase in living costs, cuts to Universal Credit, and the like, news that alcohol duty is being cut is unlikely to feel as exciting as Rishi Sunak has made it sound. Still, from February 2023, there will be what Sunak calls “the most radical simplification of alcohol duties for 140 years.”

This means a pint at your local will, according to the Treasury, will be 3p less dear. Rose, fruit ciders, ‘lower strength,’ beers and wines and liqueurs will also be cheaper.

This change has been made in part to get more people to go out for drinks rather than staying at home.

Changes to travel costs

While the tax on petrol and diesel remains unchanged for the 12th year, at 57.95p per litre, those looking to set their sights a little further than France or Spain are likely to see flight prices hiked. This is because flights over 5,500 miles will see Air Passenger Duty (APD) rise. This is a levy airlines pay, which passengers fund through the cost of plane tickets.

However, duty on domestic flights from April 2023 will be lower, meaning it’s likely that it will be cheaper to fly across the UK.

Tags: Alcohol Duty, Economy, national minimum wage, savings, Travel, Universal credit