The Budget speech does not cover all aspects of the Budget – that would take far too long – but summarises the general financial state of the country, how the government plan to move forwards and any major changes which will affect people. The Budget in its entirety covers many aspects of public spending, and we’ve broken down some of the lesser known points from the most recent Budget below, so you can better understand how the changes will affect you and your family’s finances as we move into 2018.
Credit unions allowed to take on more members
Credit unions are non-profit and allow people who are part of a certain community or organisation to save and borrow money. This can sometimes allow people to borrow money with better rates than they could get elsewhere, but they must be a member of the credit union first. You may have a credit union in your area, or connected with your workplace/profession that you can join, if you haven’t done so already.
Credit unions are owned and controlled by the members, which means there are no shareholders to pay. By law, a credit union is not allowed to charge more than 3% per month on the reducing balance of a loan, which works out at 42.6% APR, although many credit unions will charge less than this. Previously, credit unions were only allowed up to 2 million members at any one time. This meant that many people could not join their local union. In the small print of the Budget, this has now been increased to a limit of 3 million members, in order to help people access credit more easily.
Working-age benefits frozen
One of the more impactful changes which has gone under the radar involves working-age benefits. Many people rely on or have their income boosted by certain government benefits, whether they’re in our out of work for whatever reason. The previous Chancellor of the Exchequer, George Osborne, put a freeze on benefits in 2015 and it has recently been announced by the government that this freeze will continue. The freeze affects benefits such as tax credits, child benefit, jobseeker’s allowance, employment and support allowance and universal credit, and is estimated to reduce incomes by around £300 per year for many families.
Extended marriage allowance
The marriage tax allowance allows people to transfer 10% of their personal allowance to their spouse or civil partner if they earn less than £11,500 a year, provided their partner is a basic rate taxpayer (i.e. they earn less than £45,000 per year). This can help to lower taxes for married couples or for those in a civil partnership, as the higher earner can then pay less income tax. This can save £230 per year. This allowance transfers automatically unless it is cancelled, and it stops when a marriage ends due to either divorce or death.
However, a new change in the recent Budget now allows widows and widowers to continue receiving this allowance, meaning that only divorce or self-removal can take you out of the scheme. If your spouse died on 6th April 2015 or after, then you are now still entitled to this tax saving. Unclaimed marriage allowance will be backdated for four years, so it’s certainly worth looking into if this applies to you.
Credit history hope for renters
A poor or non-existent credit history is a real problem for many hopeful first time buyers, as it prevents them from obtaining a mortgage easily. Your credit history shows your borrowing behaviour over the last 6 years and can only be deemed ‘good’ if you have borrowed money and paid it back in full and on time (unsecured credit only). The point of a credit history report is to let lenders know that you are able to make regular payments responsibly, and that you can be trusted with debt. You can qualify for more credit products and achieve much lower interest rates when you have a good credit history, but to build one up can be difficult.
For those who rent their home, having an excellent credit history may soon be a much easier prospect than before. As part of the recent Budget, Philip Hammond has put aside £2million for a competition. This competition will be aimed at financial technology firms, and asks them to design a process whereby rent payments will count towards your credit history, helping you prove that you are responsible with money. This is unlikely to be put in place very soon, but it’s certainly one to keep an eye out for.
Changes to self-assessment fines & tax debt
If you are self-employed, or if you have income other than your main work, then you have to send in a tax return each year. This must be done by a certain date and being late means a standard fine. This is changing under the new budget to a points-based system, much like the current system for driving licences. If you fail to submit your tax return on time, you will be given points. It is thought that a certain number of points will then translate to a fine.
The way that HMRC collects underpaid taxes is also changing. In the past, if you had not been taxed enough, HMRC would have to wait until the next year before they started taking more tax from you to recoup the losses. This process is now being made much faster, as new software is able to streamline the process and adjust tax codes for those with PAYE incomes (those who have their income tax taken out at source, rather than having to fill in a tax return).
It is possible that further analysis of the Autumn Budget 2017 will bring up further points of interest. For this reason, it’s always important to read news from various sources and consult impartial bodies for further information. Being aware of how changes like the above will affect you can help you prepare and ensure you avoid any nasty shocks as things change.
