Emergency Budget 2015 – How your finances will be affected

“This is a big Budget for a country with big ambitions”

2015 emergency budget

In the opening minutes of the first fully-Conservative budget for almost 20 years, Chancellor George Osborne set out his party’s plans to cut £12billion from the UK’s welfare bill in an attempt to cut the country’s deficit.

The new Budget proposals undoubtedly aim to do this, but what new policies will impact on the finances of the general public?

At a glance, here are the main changes that may affect you:

National Living Wage

The Conservatives have taken the bold move of adopting one of Labour’s policies and introducing it into their own manifesto. The new ‘National Living Wage’ will be introduced from next April.

Starting at a rate of £7.20 and rising to £9 by 2020, the new proposal is essentially an additional tier to the minimum wage, available to workers aged 25 and up.

Inheritance Tax threshold Increased

A brand new top-up to the Inheritance Tax personal allowance threshold has now been introduced on properties.

The current personal allowance is £325,000 meaning assets up to this value can be passed on to beneficiaries free of IHT – combined with a spouse this increases to £650,000.

Now there is an additional £175,000 allowance on properties – again, combined with a spouse this means properties worth £1million will be exempt from IHT.

Changes to Benefits

Working age benefits will be frozen for 4 years, and Child Tax Credits can now only be claimed for the first 2 children in a family.

Benefits will also be capped at £20,000 a year (£23,000 in London), down from a yearly cap of £26,000.

There will also be no automatic housing benefit available for 18- to 21-year-olds.

Social housing rent will actually decrease at a rate of 1% per year for 4 years, and parents of 3 and 4 year olds will be eligible for 30 hours of free childcare per week.

There will also be no automatic housing benefit available for 18- to 21-year-olds.

Student Maintenance Grants Scrapped

Students will now have increased loans in order to pay for their living costs at University.

The maintenance grants offered for living costs (up to £3,387 per year) will now be scrapped and incorporated into the maintenance loan, which increases to £8,200 per year.

They will be re-paid along with the tuition fee – 9% of income when earning over £21,000 per year.

Market Rent to be Charged

There are around 340,000 people currently living in local authority housing or as housing association tenants that have a household income of over £30,000.

Should you earn this per year (£40,000 in London), then your rent will increase to market or near-market rates, meaning higher outgoings from your take home pay.

Personal Tax Allowance

A new personal tax allowance of £11,000 will be introduced from April 2016.

The new allowance – which is the amount you can earn each year before being eligible to pay tax – already rose from £10,000 to £10,600 earlier this year.

There is also a rise to the threshold for higher rate income tax. The amount you now need to earn before paying 45% income tax is £43,000.

These new rates also apply to pension income, as you are still required to pay income tax at your marginal rate.

This artilce was created with the help of Ryan Smith, part of the content development team at Local Financial Advice, connecting people with local financial advisers in their local area with the aim of achieving their financial goals.