If you've read the news at all in the past few days, whether that's via a scroll through social media or by tuning into your TV channel of choice, you'll likely have heard talk of the government's mini-budget – which was released this morning.
To recap, since taking over as Prime Minister, Liz Truss appointed Kwasi Kwarteng as Chancellor of the Exchequer, a position previously held by Rishi Sunak. As for what Kwarteng does in this role, being Chancellor means he's responsible for all-things-money, which includes raising revenue through taxation or borrowing and for controlling public spending.
As such, Kwarteng is in charge of the mini-budget – which he has said will "turn the vicious cycle of stagnation into a virtuous cycle of growth" – and his decisions will have a direct impact on the public's collective and individual finances as we head deeper into a cost-of-living crisis.
But, with so much political jargon being thrown around during discussions of said mini-budget, it can be hard to work how you'll actually be affected by it all. With that in mind, here are the key takeaways from the Chancellor's mini-budget, as well as what the impact will be on your finances.
How will the mini-budget impact your finances?
Universal Credit rules will be tighter
In his mini-budget, Kwarteng announced changes to the rules on part-time workers claiming Universal Credit. Under his new guidance, claimants currently working up to 12 hours a week on the national living wage are at risk having their benefits reduced if they do not take steps to increase their earnings and meet regularly with a work coach. Under the Chancellor’s plans, this is now set to be increased to 15 hours.
The changes to part-time work and Universal Credit is expected to affect around 120,000 benefits claimants, and will come into effect in January 2023. Certain groups will be exempt from the requirement, including people unable to work because of a disability or long-term illness, but others will be impacted.
Over on social media, campaign group Pregnant then Screwed pointed out how mums working part-time to support their families would be impacted by the change. "If you work up to 15 hours a week and claim Universal Credit, or other benefits, you may be told you must work longer hours, or risk losing those benefits," campaigner Joeli Brearley said on Instagram.
"38% of mothers work part-time – not because they are lazy, feckless layabouts, but because they are raising our future citizens," she added. "You cannot start slashing benefits for part-time workers without improving the infrastructure that would allow people to work longer hours – hello there to our unaffordable childcare system!"
She ended her post by claiming: "This will increase child poverty."
Reversal on National Insurance rise will boost pay packets
The government's plans to raise National Insurance by 1.25% later this year was called off by the Chancellor today. This means that pay packets will not take a hit, saving nearly 28 million people an average of £330 per year, according to the BBC.
But the impact will vary greatly depending on how much you earn because there are three weekly thresholds when it comes to National Insurance. Put simply: workers pay nothing on the first £242 earned per week, then it is 13.25% on earnings between £242.01 and £967, and 3.25% on the rest.
Essentially, the more you earn, the more you'll benefit from this change.
Support rolled out to help with rising energy bills
Kwarteng opened his mini-budget speech by promising Britons that "help is coming" with the rising cost-of-living. As such, the Chancellor pledged to put a freeze on soaring energy bills, capping them at £2,500 a year for households in England, Scotland and Wales. Before the mini-budget announcement, typical household bills had been due to rise to £3,549 a year
The government also announced plans to help businesses, charities and places like schools and hospitals deal with heating costs over the colder months.
But on social media, the move was not well received, with plenty pointing out that more needs to be done to ensure the poorest members of society can afford to stay warm this winter.
"The cap on the price of energy units does not provide enough support for disabled people who have higher energy use than the average household as they need to have the heating on for longer and need to use specialist equipment," tweeted disability charity Sense. The charity also said it had found that 77% of disabled people admitted they don’t know how they’ll cope if prices continue to rise.
Income Tax cuts brought forward one year
Planned cuts to Income Tax (the tax you pay on your income) will be brought forward by one year to help those who need it most. According to the BBC, the basic rate of Income Tax will fall from 20p to 19p in the pound from April 2023 – the government says it will benefit 31 million people with an average yearly reduction in tax of £170.
Previously, Sunak pledged to reduce the basic rate of income tax before the end of the Parliament in 2024. But today Kwarteng announced this will instead happen in April 2023.
However, the change will not apply to Scotland where income tax bands are different.
Stamp Duty cut to boost housing economy
Big changes will come into play for first-time buyers thanks to Kwarteng, who today announced a cut on Stamp Duty – the tax you pay when you buy houses, flats and other land and buildings over a certain price in the UK.
In his mini-budget, Kwarteng cut Stamp Duty, raising the point up to which none is paid from £125,000 to £250,000. For first-time buyers, this threshold increases from £300,000 to £425,000, whilst the maximum value of a property on which first-time buyers' relief can be claimed will also increase from £500,000 to £625,000. According to the government, these measures will take more than 200,000 buyers out of paying for Stamp Duty altogether.
Kwarteng also confirmed that the cuts to Stamp Duty were permanent, and would be effective from 23 September.
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