How the Budget 2017 will affect you

Autumn Statement7

Chancellor Philip Hammond’s Budget contained a number of announcements that will have a significant effect on families and homeowners across the country.

We look at when these changes are set to take effect, and what they will mean for you and your family’s finances for the rest of 2017 and beyond.

Tax

National Insurance contributions for self-employed people are set to rise in the coming years. In April next year the rate will increase from the current level of nine per cent to ten per cent, before rising to 11 per cent in April 2019 for anyone earning more than the threshold of £8,060. This will cost those affected around 60p a week, yet generate around £145 million a year for the government by 2021-22.

The Chancellor also confirmed that class 2 contributions, which have a lower threshold, are set to be abolished. When combined, the changes are only set to affect self-employed people whose profits exceed £16,250.

A key decision behind the move, according to Mr Hammond, is to create fairness between the self-employed and employees, who he said each use public resources in equal measure.

Savings

A date and rate has been confirmed for the new government-backed savings product that was initially unveiled in the Autumn Statement.

Investment Guaranteed Growth Bonds are set to be offered by National Savings and Investments from April 2017, and will pay 2.2 per cent interest – something the Chancellor said is a “market-leading rate”.

It will be open to anyone aged 16 and over, and will be subject to a minimum investment limit of £100 and a maximum investment limit of £3,000, with savers required to lock in their contributions for at least three years.

The Chancellor also confirmed that April will see the launch of the new Lifetime Individual Savings Account (LISA) for those aged between 18 and 40, who can save up to £4,000 a year, with the government adding a 25 per cent bonus if the money is used to buy a home or as a pension after the age of 60.

Income

The National Living Wage is set to rise from £7.20 to £7.50 in April for those aged 25 and over, while public sector pay is set to rise by one per cent annually until 2019-20.

The personal allowance, which is the amount people can earn before they pay tax, is currently set at £11,000, but this is set to rise to £11,500, and will increase further to £12,500 by 2020-21.

At the same time, the threshold for the higher rate will go up from £43,000 to £45,000, apart from for those in Scotland, where £43,000 will be the level.

Families who have a third or subsequent child born after April will not qualify for Child Tax Credits, which will also apply to families claiming Universal Credit. The family element of child tax credits, which is worth £545 per year, is also set to be abolished.

Subscriptions and direct debits

Following reports that many people are falling into a ‘subscription trap’, by signing up for certain paid-for services without intending to, a new Green Paper will be launched to investigate.

The key focus will be on people being automatically charged for services after free trial periods end without comprehensive notification or warnings from the outset.

Motoring

The Chancellor made the expected announcement that fuel duty will be frozen for a seventh consecutive year.

However, the cost of car insurance may be set to increase, due to the rise in Insurance Premium Tax from 10 per cent to 12 per cent in June 2017.

Vehicle Excise Duty (VED) bands, originally announced in the 2015 Budget,  are also on course to be finally introduced for cars registered from April 1, with zero, standard and premium levels, although existing vehicles will be exempt for the time being.

For news and advice on the latest financial and economic developments that could affect your household, visit the Money section of Avant Life.