What does the Spring Budget mean for you?
A summary for working families
Today, Chancellor Philip Hammond delivered the last Spring Budget, with all future Budgets now being delivered in the Autumn.
The Chancellor indicated that this would be a budget to help ordinary working families who are feeling the squeeze, however in reality there was little that was new, with many measures having been announced previously. We did, however, receive confirmation that Tax-Free Childcare will start next month and be rolled out to all eligible families by the end of the year.
Here is our synopsis of how the budget may impact on families:
- Inflation: Families are likely to see an increase in everyday household costs. Inflation is expected to rise to 2.4% in 2017 and 2.3% in 2018 before falling back to 2.0% in 2019.
- Parental benefits for self-employed: The Chancellor announced that, in addition to the government’s ongoing review into employment practices, the government will consider whether there is a case for greater parity in parental benefits between the employed and self-employed with a consultation planned for the summer of 2017. We will look out for this consultation and keep you updated.
- ‘Returnships’: New support was announced to help individuals who are returning to work. The government will work with business groups and public sector organisations to identify how best to increase the number of returnships, supported by £5 million of new funding. Returnships offer people who have taken lengthy career breaks a clear route back to employment. This will likely be of benefit to parents who have taken a career break following the birth of their children.
- Soft Drinks Industry Levy: The levy rate for added sugar drinks with a total sugar content of 5 grams or more per 100 millilitres will be set at 18 pence per litre, and those with 8 grams or more per 100 millilitres will be set at 24 pence per litre. This will mark an increase in the cost of fizzy drinks as part of plans to reduce childhood obesity.
- Subscriptions: The Chancellor also announced that new measures will be considered to protect people who inadvertently end up subscribing for services, often at a high cost, after signing up for free trials.
The Chancellor also announced that the main National Insurance contribution rate paid by the self-employed would rise in coming years, increasing from 9% to 10% in April 2018 and then to 11% in April 2019 for those earning more than £8,060. However, on 15 March 2017, the Chancellor announced that this plan would not proceed as announced.
And what did we already know?
- Childcare: The Chancellor announced that the Tax-Free Childcare scheme will start to be rolled out from April 2017. For more information see our guide Big Changes, Big Choices which explains the new scheme and highlights differences between it and Childcare Vouchers, an existing scheme providing financial assistance to working parents. We will continue to provide updates as more information becomes available. The Chancellor also announced that, from September 2017, free childcare provision will double for working families with 3 and 4 years olds in England, from 15 hours to 30 hours a week. It is important to note that this does not apply in Northern Ireland.
- Personal Allowance: Personal allowance, the amount you can earn before paying tax, will rise to £11,500 from April 2017. It will increase to £12,500 by 2020-21. The level at which you begin to pay the Higher Rate of tax will increase from £43,000 to £45,000 from April 2017. It will rise to £50,000 by 2020-21. This will mean that more people will fall into the 20% tax bracket.
- Living and Minimum wages: As previously announced, the National Living Wage will increase from April 2017 from £7.20 per hour to £7.50 per hour. The National Minimum Wage will also increase; for 21-24 year olds it will rise to £7.05 per hour.
- Welfare cap: The Welfare cap remains in place and the government will deliver welfare savings already identified but has no plans to introduce further welfare savings in this Parliament beyond those already announced.
- Universal Credit: There was further confirmation of changes to the Universal Credit taper rate which will be reduced from 65% to 63% from April 2017. Universal Credit will replace Tax Credits beginning from September 2017 in Northern Ireland. The taper rate calculates your reduction in benefits as your salary increases. At the new rate you will keep 37p for every £1, previously you would have kept 35p for every £1. As Universal Credit will be introduced in Northern Ireland from September this means that all local claimants will automatically begin on the 63% taper.
- Tax Credit changes: As previously announced in the 2015 Budget, two changes to Tax Credits will take place from April 2017. Firstly, the child element of Tax Credits will be restricted so that only the first two children in a family are eligible. Third and subsequent children born after April 2017 will no longer be eligible. Secondly, the family element of Tax Credits, worth £545 per year, will be removed for new claimants from 2017. What the Chancellor did confirm in today’s budget is that the government will provide exceptions to limiting support to two children for the child element in Tax Credits and Universal Credit. These exceptions are for third and subsequent children where parents face particular circumstances, such as multiple births.
- Savers: It was confirmed that the new three-year NS&I Investment Bond, which was previously announced for spring 2017, will be available from April. The Bond will begin with an indicative rate of 2.2% and will offer the flexibility to save between £100 and £3,000 for those aged 16 or over. Savers must lock in their money for three years. However, critics have labelled the Bond as “underwhelming” with other market leading deals offering the same rate of interest on savings.
- Owning a car: Fuel duty will be frozen for a seventh year, but the cost of vehicle insurance may rise owing to an increase in the Insurance Premium Tax from 10% to 12% in June.
Get in touch if you have any questions about what you and your family may be entitled to or call our free Family Benefits Advice Service on 0800 028 3008.
We can answer questions about all of the forthcoming changes to financial support, as well as carry out personal calculations to ensure that you are claiming all you are entitled to.