In our recent article How can Millennials Manage Their Money Better? we explored some of the financial challenges that are particularly impacting the Millennial generation, i.e. those aged from around late twenties to early forties.
Five of these challenges were:
We also covered ways in which you can begin to overcome these challenges, and explained our aim to regularly feature articles that will help you to get the most out of your money.
In today’s article we take a look at the recent Budget, and some of the ways in which it may impact on your finances, in both positive and negative ways.
As always, the overall impact of the Budget on your finances depends on your current situation. So our analysis below is a very general guideline as to what you can expect.
What we can tell you is that there is both good news and bad news.
Let’s start with the good:
From April 2022, the minimum wage for those aged 23 and above the rate – also known as the National Living Wage – will rise by 6.6% from £8.91 to £9.50 per hour.
The temporary freeze on public sector wages that came into force during the pandemic is being lifted. Chancellor Rishi Sunak says this means that public sector workers will see “fair and affordable pay rises” over the next three years.
The Universal Credit taper is used to reduce the amount of Universal Credit that employed people receive relative to what they earn. The taper will be decreased from 63p to 55p for each £1 earned above £515 a month, which means that you get to keep more Universal Credit than previously. The change will be implemented by 1st December 2021 at the latest.
Fuel duty continues to be frozen, despite rumours that they would be increased. Fuel duty accounts for around 60% of the price of fuel. The duty will remain at its current rate of just under 58p per litre until at least 2023.
Alcohol tax is to be overhauled from February 2023. so that drinks are taxed based on strength not category. Tax on sparkling wine will be reduced to the same level as still wine, meaning its price will drop. Rates will also be reduced on draught beer and cider to provide a boost to pubs.
The government has pledged £5 billion towards replacing dangerous cladding on high-rise flats. This will be part-funded by a levy on some of the largest property developers in the form of a new Residential Property Developer Tax – RPDT.
Domestic UK flights will get cheaper from April 2023 due to a 50% reduction in air passenger duty (APD).
Inflation is expected to rise to 4% by the end of the year from its current level of 3.1%. The Chancellor attributed this to the global reopening of economies following the Covid pandemic.
Rising inflation means that unless your pay increases by the same amount, you will be worse off than at present.
This was announced in the previous Budget and is still in place. The pay thresholds that determine the rate at which income tax is paid have been frozen from April 2021 for five years.
During this time more people will move into higher tax bands due to pay increases. So at that point you may earn more, but will also have to pay more tax on your earnings.
The planned rise in National Insurance from April 2022, as announced In September, remains in place. Whether you are an employer, employees or self-employed, your National Insurance rate will rise by 1.25p per pound from April 2022 to fund social care.
The budget did not include any additional measures to support households with the current increase in domestic gas and electricity bills.
Whereas domestic UK flights will become cheaper due to a decrease in APD from April 2023, long haul flights will see increased APD which will make them significantly more expensive.
You can find more specific information about how the Budget will affect you by searching for online Budget calculators, for example from business advisors Blick Rothenberg. These calculators enable you to enter your financial information and get a clearer idea of whether you will be better or worse off as a result of the Budget.
We hope that this article has been helpful and helps you to plan your finances more accurately over the next few months. If you are in need of a financial boost at any stage, remember that Munzee offers 24 month loans that may be able to help.
Check back here soon for more financial and lifestyle articles from Munzee Loans.
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