How did the budget affect your finances?

Tuesday 21 July 2015, 01:41 PM

Sam Barratt
Financial Journalist , Freelance

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Chancellor George Osborne's first budget for the Conservative government was full of talk of boosting productivity and rewarding working people. But, for most people, the big question was how the changes would affect their finances. 

These are some of the announcements that may affect you - and the steps you may want to consider taking as a result. 

Taxes - with an increase to the personal income tax allowance (£11,000 from April 2016) and the introduction of a new national living wage (£7.20 an hour from April 2016 rising to £9 by 2020) for anyone aged over 25, chances are your pay slips will look a little healthier next tax year. 

ACTION: If your net pay's set to rise as a result of the income tax changes or the new national living wage, consider making increases to other income related areas of your finances such as your savings, your pension contributions or your income protection cover. 

Benefits - Osborne is looking for £12bn of welfare cuts and the first wave of savings were unveiled in the budget. As well as restrictions on tax credits the chancellor announced a four year freeze on working-age benefits, excluding maternity pay and disability benefits. In addition, the annual benefit cap will be reduced to £23,000 per household in London and £20,000 in the rest of Britain.

ACTION: With welfare cuts in the pipeline, making sure you put adequate cover in place if you're unable to work becomes increasingly important. Consider taking out income protection or, if you already have it, check the benefit level will be sufficient to protect your lifestyle.

Inheritance tax - from April 2017, a new family home allowance is being added to the existing £325,000 inheritance tax allowance. This starts out at £100,000 and will increase to £175,000 by 2017 - giving married couples and civil partners an opportunity to leave up to £1m inheritance tax free. The new allowance will only be available if the property has been the main home and it is left to a direct descendant such as a child, stepchild or grandchild. The family home allowance will also be available for the proceeds of a property sale if someone downsizes and will be gradually withdrawn for estates worth more than £2m. 

ACTION: Review any inheritance planning you have in place. This additional allowance will benefit many people, especially where the property value comes close to or exceeds the current inheritance tax allowance (£325,000 or £650,000 for couples). 

Insurance premium tax - the announcement that insurance premium tax, which is often shortened to IPT, is increasing from 6% to 9.5% from November came as a bit of surprise. This tax applies to general insurance policies and insurance analysts forecast that, as a result of the increase, the average household will pay an additional £10-£12 to insure their home and a further £12-13 to cover the car. Thankfully it doesn't apply to long-term protection policies such as critical illness insurance, life assurance and income protection.

ACTION: Shop around for insurance cover at renewal as this will help you get a better price.