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The new budget and how it will affect personal finances 

by Madaline Dunn

The new budget was announced as the country faces widespread industrial action, the continued cost of living crisis and record inflation. The first big budget since Kwasi Kwarteng’s budget under Liz Truss tanked the economy, it comes while the country faces the biggest ever fall in living standards. Moreover, projections are that the country’s tax burden is to reach a new post-war record.

You’ll likely have heard that this Spring Budget has some good and some bad parts, so at The Salary Calculator, we’ll guide you through what you need to know and how you’ll be affected. We’ll walk you through the following:

• The budget highlights
• Pension pot changes
• How your take-home pay will likely be affected

Budget highlights

While this Spring budget sent fewer shockwaves across the UK (and the world) in comparison to the last, there are a number of budget highlights to take note of.

The planned rise to the Energy Price Guarantee (EPG) has been delayed, which means that it will remain at its current level for another three months; this means that the average household bill will stay at around £2,500 a year. Further to this, prepayment energy meter bills will be aligned with direct debit, leading to savings of around £45 a year for prepayment customers.

Further, the freeze on income tax and national insurance thresholds has been extended until April 2028. This means that the income tax personal allowance will stay at £12,570 until April 2028. The threshold for top-rate taxpayers of 45% will also fall from £150,000 to £125,140.

Childcare support was another key highlight in the budget. Currently, according to the OECD, the UK has the most expensive childcare costs than anywhere else in the economically developed world; so these new measures are long overdue.

There will be a phased introduction of this enhanced childcare support, as follows:

• From April 2024, working parents with children two and over will be given 15 free hours a week.
• From September 2024, these 15 hours will be extended to all children over nine months old and be introduced from maternity leave’s end.
• From September 2025, those who are eligible with children under the age of five will be provided with 30 hours of free childcare.

In addition, there will be a change in how support is delivered to those on the lowest incomes. For those using the Universal Credit system, childcare costs will be received upfront. That being said, the childcare support changes have not been without criticism. For example,

Child Poverty Action Group’s Chief Executive Alison Garnham outlined that the stringent job-search requirements for parents on universal credit (UC) are “concerning.”

In April, the National Living Wage will rise to £10.42 per hour from £9.50 for over 23-year-olds. Meanwhile, for those:

• Aged 21 to 22 years, it will rise to £10.18,
• Aged between 18 and 20, it will increase to £7.49,
• Aged 16 to 17 and apprentices, it will rise to £5.28.

Additionally, further to Hunt allocating local authorities the power to charge more Council Tax without holding a referendum (5%), from 1 April, 2023, millions will be faced with the biggest council tax hike ever, with three in four councils increasing council tax by the maximum amount allowed.

For consumers, it’s also worth noting that there will be a 10.1 per cent rise in alcohol duty rates in line with the Retail Price Index (RPI), which means that a bottle of wine could increase by 44p. However, due to the Draught Relief scheme, the tax on draught beers will remain the same from 1 August. Duty rate on all tobacco products will rise by 2 per cent above RPI inflation, too. Hand-rolled cigarettes, specifically, will see an additional 6 per cent rise above RPI.

Pension pot changes

The budget detailed significant changes to pensions. The annual pension allowance (how much you can pay into your pension and get tax relief) was originally £40,000 or your total earnings, whichever was lower, however from 6 April 2023, it will be a maximum of £60,000.

Additionally, while the lifetime allowance (the total amount you can pay into your pension during your lifetime) is currently £1,073,100 and was intended to stay this way until 2026, in the budget, it was announced that the lifetime allowance will be removed completely from 6 April 2023.

How will your take-home pay be affected?

Everyone’s take-home pay will be affected by the budget announcement differently depending on their earnings, whether or not they have children, are retired, or have student loans.

For example, because the tax brackets have been frozen and are not adjusting to keep pace with inflation, experts say that both basic and higher taxpayers will face what economists call “fiscal drag”. The Office for Budget Responsibility estimates that this will create an additional 3.2 million new taxpayers, with 2.6 million more people paying the higher rate of tax.

Further, changes to student loans mean that the Student loan repayment threshold will drop from £27,295 to £25,000 for those starting courses in September 2023. The thresholds are as follows:

• If you’re on a Plan 1 student loan (you started your course before 2012), you’ll begin repaying when your income is over £22,015 a year,
• If you have a Plan 2 student loan (you started your course between 1 September 2012 and 31 July 2023), you’ll start repayments at £27,295 a year,
• If you’re on a Plan 4 student loan (you’re a Scottish student who started your course anywhere in the UK on or after 1 September 1998), you’ll only repay once your income has exceeded £27,660 a year,
• Those on a Plan 5 student loan (you started your course on or after 1 August 2023), will start repaying their loan when their income goes over £25,000 a year,
• For those on a Postgraduate Loan repayment plan (a Master’s Loan or a Doctoral Loan), repayments begin at £21,000 a year (before tax and other deductions).

If you’re on Plans 1, 2, 4 or 5, and your income exceeds the threshold, you’ll start repayments at a rate of 9%, and 6% if you’re on a Postgraduate Loan plan.

At The Salary Calculator, we know that working out what you owe can be a bit of a head-scratcher, so we’ve simplified things with our updated Take-Home tax calculator. To get a breakdown of how you’ll be affected by the budget, head over here.

Tags: 2023, budget, childcare, Pensions, student loan

Guidance for university students during the cost of living crisis

by Madaline Dunn

As the UK enters a recession, inflation rises, and the cost of living soars, times are tough, and research shows that students in higher education are increasingly feeling the pinch. Research from Unite shows that around two-thirds of students are now worried about the increased cost of living, and more and more are either considering or proceeding with dropping out.

Recently, a Department for Education (DoE) spokesperson said that it is responding to the crisis by increasing the amount students can access through loans and grants for living and other costs and cited the work of universities in this area. However, many students and those working within education argue that more help is needed and are pushing for more resources to become nationally available. The UUK, a collective of 140 universities, has specifically called on the government to do more to help universities support students.

At The Salary Calculator, we understand how stressful it can be trying to juggle education and financing your day-to-day, so, below we’ll explore:

• Some of the context around student finances right now
• The financial support and advice currently available and how to access it
• Tips to help you stretch your loans and grants

The rise in students struggling with the cost of living crisis

There are no two ways about it, students are really feeling the brunt of the cost of living crisis, and the implications are far-reaching. Working-class students are already underrepresented within higher education, and the current crisis threatens to widen the gap. Figures from the Student Loans Company in September reveal that almost 40,000 students in England, Wales and Northern Ireland permanently withdrew from their courses and stopped receiving student loans by the end of August.

It’s no wonder so many are finding university to be financially unviable, with a recent survey published in July finding that 11% of students were using food banks, with one-third having to rely on credit cards to survive. Moreover, while working to support one’s studies is nothing new, studies show that students are being forced to work far beyond the recommended 15 hours a week, with 9% of students working 21-30 hours a week and 11% working over 31 hours. Moreover, Unite has outlined that around one-third of students are having to increase their working hours just to stay afloat.

What financial support is available and how can you access it?

On the 11th of January 2023, the government announced that it would provide an additional £15 million in hardship funding this financial year to enable universities to better support students facing financial strain. Likewise, the government outlined that loans and grants supporting undergraduate and postgraduate students will be increased by 2.8% for the 2023/24 academic year, while university tuition fees will remain frozen at £9,250 for the next two years.

In addition to this, the 24 Russell Group universities recently announced a pledge to inject tens of millions more in financial support to help students with the rising cost of living, and match the UKRI uplift to its minimum 2022-23 postgraduate research stipends.

But, what does this mean in real terms? Well, if you’re struggling with finances at university, you may be eligible to access your university’s hardship fund. Eligibility is dependent on a number of factors, which we’ve outlined below:

• You’re a student with children or a single parent,
• You’re a student from a low-income family,
• You’re a student that is a ‘care leaver’,
• You’re a mature student with existing financial commitments ,
• You have a disability,
• You are homeless or living in a foyer.

Find out more about accessibility to hardship funds here.

There are other measures being brought in by universities, and these offerings vary from institution to institution. Durham, for example, is offering students free breakfasts while eligible households at York are being offered help with energy bills. The University of Wales Trinity St David (UWTSD) is offering meal deals for students in the university canteen, for example, soup and a roll for £1, and a food hub offering items for free for students or staff who need help with “no questions asked.”

Alongside hardship funds and student finance, you should check to see whether you’re eligible for other forms of scholarships, bursaries and grants. Scholarships are available to high achievers but are also awarded based on gender, ethnicity, background and disability. In the case of the latter, there is the Disabled Students’ Allowance. You can also get a scholarship for:

• Being vegetarian or vegan via The Vegetarian Charity’s grant,
• Being talented at eSports at the University of Roehampton,
• Studying Welsh through the Coleg Cymraeg Cenedlaethol scholarship.

To read more about the different loans, grants, bursaries and scholarships available, head over here.

Tips for stretching loans and grants

Once you’ve managed to access the grants, loans and scholarships you’re eligible for, you may find that you’re still struggling with your finances, and in this case, below, we’ve outlined some helpful tips to help you stretch your money a little further.

Groceries are undeniably expensive right now, so making savings where you can is helpful. Luckily there are a number of sites that offer either reduced or free food. Both ​​Olio, and Too Good To Go, are good zero-waste apps to check out. Likewise, check to see if there are any food waste supermarkets in your area. You can also check what food banks are available to you locally by searching on the Trussell Trust’s website.

When it comes to planning your week and making sure you keep costs as low as possible, meal plans can be really helpful. This way, when you go out to your food shop, you have a clear idea of what you need to buy and how much it’ll cost, saving you a lot of hassle and money.

Another tip for finding cash when things are tight is to look into selling items that you don’t use or need anymore. Sometimes we can surprise ourselves with the amount of stuff we have that’s just gathering dust. Facebook Marketplace, eBay, Gumtree, Depop, and Vinted are some of the most popular sites for doing this.

It could also be beneficial to look into switching to a better student bank account because there are lots that offer lots of extras, such as free cash and railcards (which definitely can’t hurt if you’ve seen the price of train tickets recently). Money Saving Expert is a good site to check out if you’re looking to compare and contrast. Likewise, using a student bank account often means you’ll have access to a 0% overdraft, and this can act as a buffer when things get tough.

That said, it can be easy to slide into debt when money is tight. With around 27% now using credit cards to help with student life, there’s always a risk of not being able to pay back what you’ve taken out and that can come with a lot of stress. Don’t face this alone. There are a number of debt advice charities out there that can help, including:

• StepChange,
• National Debtline,
• Debt Advice Foundation.

Tags: cost of living crisis, debt, Financial aid, student finance, student loan

Student loans and interest rates

by Madaline Dunn

According to the OECD England has the most expensive publicly-funded university system in the world. Back in 1998, student tuition fees were £1000 a year, which increased to £3000 in 2006, and then skyrocketed to £9000 in 2012. Alongside this massive hike in tuition fees, since 2012, maintenance grants and NHS bursaries have been abolished, forcing many to take on more debt in the form of loans, rather than benefiting from non-repayable grants.

Student loans come with interest, which is added all the time, and you may have seen recent reports that there are changes coming for student interest rates, which will reach up to 12% in some cases.

Interests and loans can be complicated at the best of times, and circulating reports may have you furrowing your brow, but at The Salary Calculator, we’ll walk you through all the changes and explain:

• What’s going on with student loan interest rates
• How you might be affected
• Whether there are further changes ahead

Student loan interest rates

In England, according to government figures, the average amount of debt a student accumulates from their time studying is £45,000, and with fees and interest so high, few ever fully repay their loans. In fact, this percentage is at 20%

That said, according to the Institute for Fiscal Studies, students who took out a loan after 2012 are in for a “rollercoaster ride”. Interest rates on post-2012 student loans are based on the retail prices index, and after RPI rose in March, most graduates will see interest rates rise from 1.5% to 9%. Higher earners (with an income of £49,130 and above) will be hit the worst, however; the maximum interest rate on their loans will increase from 4.5% to 12% for half a year. 

According to estimates, this increase means that the average graduate with £50,000 debt will incur around £3,000 in interest over six months. The IFS study outlined: ​”That is not only vastly more than average mortgage rates, but also more than many types of unsecured credit,” adding: “Student loan borrowers might legitimately ask why the government is charging them higher interest rates than private lenders are offering.”

Looking ahead, Ben Waltmann, a senior research economist at the IFS, explained that unless the government makes changes to the way student loan interest is determined, there will be “wild swings in the interest rate over the next three years.” He outlined: “The maximum rate will reach an eye-watering level of 12% between September 2022 and February 2023 and a low of around zero between September 2024 and March 2025.”

He said that there is “no good economic reason for this.” Adding: “Interest rates on student loans should be low and stable, reflecting the government’s own cost of borrowing. The government urgently needs to adjust the way the interest rate cap operates to avoid a significant spike in September.”

To learn more about how the changes will specifically affect you, check out the government website, which provides a complete guide to terms and conditions. 

How will this affect you?

According to a Tweet by Michelle Donelan, the Minister of State for Higher Education, this interest rate hike on student loans has “no impact on monthly repayments.” Further to this, she said, “These will not increase for students. Repayments are linked to income, not interest rates.” However, not everyone agrees that the situation is as clear cut as this. 

The IFS’s Waltman explained that while it is true the interest rate on student loans has “no impact” on monthly repayments, it affects “how long those who do pay off their loans before the end of the repayment period have to make repayments and therefore the total amount these students repay over their lifetimes.”

In addition to this, the IFS said that one of the many detrimental effects of the hike could be discouraging students from going to university for fear of mounting financial costs, and with record hikes to the cost of living, this is a valid and reasonable concern. Alongside this, the IFS also said that the change might force some graduates to pay off large sums of debt when it “has no benefit for them”.

Are further changes ahead?

Aside from changes to interest on student loans, the government has announced proposals that will affect loan accessibility, too. In response to the Augar review of post-18 education, in February, the government announced plans to block students who ​​fail to attain English and Maths GCSEs or two A-levels at grade E from qualifying for a student loan.

Experts have warned that these new changes will detrimentally impact students from lower-socio-economic backgrounds the worst and put a “cap on aspiration”. Sir Peter Lampl, founder and executive chair of the Sutton Trust education charity, outlined: “The introduction of any minimum grade requirement is always going to have the biggest impact on the poorest young people, as they are more likely to have lower grades because of the disadvantages they have faced in their schooling.”

The government also outlined that the repayment threshold will be cut from £27,295 to £25,000 for new borrowers beginning courses from September 2023, and further to this; students will now pay off their debt for ten years longer (for 40 years rather than 30 years).

Speaking about the changes and their impact on graduates, Martin Lewis, founder of MoneySavingExpert.com, said: “It’s effectively a lifelong graduate tax for most.” Adding: “Only around a quarter of current [university] leavers are predicted to earn enough to repay in full now. Extending this period means the majority of lower and mid earners will keep paying for many more years, increasing their costs by thousands. Yet the highest earners who would clear [their debt] within the current 30 years won’t be impacted.”

Tags: 2022, Economy, interest rates, student loan

April 2019 tax rates

by Admin

The Salary Calculator has been updated with the tax rates which will take effect from 6th April 2019. There is a significant increase in the tax-free Personal Allowance from £11,850 to £12,500 per year, and outside of Scotland the threshold from 20% basic rate to 40% higher rate income tax has been increased to £50,000. Scottish tax thresholds are different from the rest of the UK, current information suggests that they will not increase as much as the UK rates will.

There have also been increases in the thresholds for Plan 1 and Plan 2 Student Loan repayments, so those paying off their loans will find their repayments lowered in the new year.

You can try out the April 2019 tax rates for yourself by choosing “2019 / 20” in the Tax Year drop-down on The Salary Calculator. You can also see a side-by-side comparison of 2018 and 2019 with the 2018 and 2019 income tax comparison page.

The calculator has been updated with the best information currently available – if any of the details change before the start of the tax year the calculator will be updated to reflect those changes.

Tags: 2019, April 2019, budget, income tax, national insurance, Pay As You Earn, pension, personal allowance, student loan, student loans, tax rates, The Salary Calculator

A new beginning for 2015

by Admin

As 2015 opens, it seems everyone I know is starting a new job! A common theme of conversations I’ve had is either promotions or moving jobs to a new company and new horizons. January is a popular time for people to make a fresh start, and what better way to do that than with a new job?

If you’re considering a move then The Salary Calculator is here to help – find out how much that new salary would bring home for you with the take home pay calculator, or even compare it side-by-side with your current salary with the salary comparison calculator. Maybe you’re thinking of improving your home life with a move to part-time work? The pro-rata salary calculator can help you see what would happen to your take-home if you reduced your hours in your current job.

Maybe 2015 for you is the year you go to university, or one in which you consider it. If this applies to you then I highly recommend Money Saving Expert’s page about the cost of university, and what those fees and loans mean – don’t make a decision about the cost of studying until you’ve read this guide, or at least watched the short video summary which appears just above point number 5.

Tags: 2015, income tax, Jobs, new job, Pay As You Earn, promotion, student loan, The Salary Calculator