If you watched the chancellor, Phillip Hammond, announcing his Autumn Statement measures and you’re feeling a bit underwhelmed, or – frankly – baffled, you’re not alone. But there were some measures that could affect you. Here, personal finance expert and founder of SavvyWoman.co.uk, Sarah Pennells, breaks down the main changes...
1. Rise in the National Living Wage
The good news from the Autumn Statement was leaked over the weekend, and that included the announcement that the National Living Wage (NLW) would go up from £7.20 to £7.50 an hour from next April. That’s definitely good news for anyone who’s currently on the NLW – and more women than men tend to be among the lower earners – but it won’t help everyone. For a start, it’s only paid if you’re aged 25 or over. If you’re younger, you’re on the minimum wage, and that could mean you only get a measly 5p an hour increase if you’re aged 17 (up from £4 an hour to £4.05 next April). Also, without a separate increase for London, where the cost of living is significantly greater, the problems faced by many in the capital remain.
2. Personal allowance
The rise in the amount you can earn before you pay tax, from £11,000 to £11,500 ext April wasn’t a surprise as it had already been announced by former chancellor, George Osborne, in the March Budget. But, given the deteriorating state of the UK’s finances, it was possible that the chancellor would water it down. The £500 rise means anyone who’s a basic rate taxpayer will be £100 a year better off.
He also confirmed that higher rate taxpayers won’t start to pay tax at 40% until they earn more than £45,000 – up from £43,000 today. This will mean an extra £400 a year and, more men than women will benefit. Although over a million women pay tax at the higher rate, over four million men do.
Additionally, Hammond has pledged that the personal allowance threshold will rise again to £12,500, with the top bracket rising to £50,000 by the end of the current parliament in 2020.
3. Salary Sacrifice
I’m not quite sure why the chancellor decided to press ahead with changes to salary sacrifice schemes. These schemes are a way for employers to offer workplace perks such as pensions, childcare, a car, gym membership, mobile phone and health screening.
If these are offered through salary sacrifice, employees don’t pay tax or National Insurance (NI) on the perk and employers don’t pay NI. After April, you’ll have to pay tax and NI on them as though they were part of your pay.
Some workplace benefits, such as pensions, childcare, ultra low emission cars (basically, electric ones) and cycle to work schemes won’t be affected, but the others mentioned will.
The government has also said that if you’ve signed up to your employer’s benefit scheme by April 2017 (when the change is due to come in), you’ll be protected until the following April. Some other perks, including school fees and accommodation costs are protected right up until 2021.
4. Three-year savings account
Interest rates are so miserably low at the moment that a three-year fixed rate savings account paying 2.2% interest is seen as something savers will get excited about. You’re not going to make a mint by saving in it because you’ll only be able to put in a maximum of £3,000 (generating £66 in interest a year). At the moment you can get a higher rate of interest from a couple of banks’ current accounts (for example, you can earn 5% on balances up to £2,000 for 12 months if you switch to TSB bank).
But this savings account from NS&I will appeal to some people who want to know what they’ll be getting for the next few years and those who don’t want to or can’t be bothered to switch bank account. Women tend to prefer cash savings to investing in the stock market, so it could help those with savings.
5. Tampon tax and funding for refuges
Last year George Osborne provoked an angry reaction from a number of women’s groups by announcing that the equivalent of VAT on sanitary products (or tampon tax) would be paid to women’s charities – up to a maximum of £15 million. Yesterday the chancellor said that the first £3 million would be given to Comic Relief to distribute to women’s charities.
This £3 million comes hard on the heels of a £20 million ‘lifeline’ for women’s refuges, announced by Theresa May earlier this month. But women’s organisations say that the closure of a number of refuges and restrictions at others (some councils will only help women from nearby), means that women are missing out on help they desperately need. Research by Women’s Aid showed that 17% of specialist women’s refuges have closed since 2010 and – until a change of policy earlier this year – two thirds of those in Engalnd and Wales were at risk of closure.
Meanwhile, Sisters Uncut, which is currently campaigning and taking direct action to secure funding for domestic violence victims, says that at central government level, Treasury funding for the Department for Communities and Local Government (which then goes out to councils), was cut in half between 2010 and 2016. There was no ring-fencing of domestic violence services, which has left the sector ‘on its knees’.
So, the new funding is welcome, but is unlikely to bring back those facilities that have already closed.
6. Abolishing Class 2 National Insurance
The chancellor confirmed yesterday plans announced in the Budget in March to abolish Class 2 National for self-employed people. But what does this mean and why does it matter? Because Class 2 National Insurance is paid by self-employed people, even if they don’t make much profit (the threshold is £5,965 a year) whereas you have to make more than £8,060 a year to pay Class 4 NI.
And paying National Insurance entitles you to certain benefits. The government says that all self-employed women will be able to get Maternity Allowance at the standard rate if they’re pregnant. It also says that self-employed people who don’t make much profit will be able to get some out of work benefits based on NI contributions - like Employment and Support Allowance for the first six months - by paying yet another rate of National Insurance. The problem is that this is more expensive.
Until we get more detail, we don’t know who this will affect. But we do know that some women who are self employed are making very little money, and I for one am keen to make sure this change doesn’t leave them worse off.
Images: iStock, Rex Features
Letting agents’ fees in England and Wales will be abolished, but not before there’s a consultation. So don’t expect a change in the next few months. Letting agents can currently charge fees for things like doing an inventory (checking the state of the property), credit checks and drawing up a contract. They have to display their fees clearly on their website and in their branches, but there’s no cap on these fees.
These fees can add up to hundreds of pounds – money you have to find upfront. Landlords say scrapping these fees will lead to higher rents, but we won’t know whether or not that’s true until the changes take effect.
The chancellor also promised extra money for housing with a new fund worth £2.3 billion – but not until 2020. It’s designed to unlock development in areas that have the biggest housing shortages. It could mean an extra 100,000 new homes. However, (call me a cynic) successive Budgets and Autumn Statements have promised extra housing, but we’re a long way from seeing them delivered.