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Video transcript
July saw chancellor George Osborne deliver the first fully Conservative Budget for 19 years, having being in a coalition government with the Liberal Democrats last time around.This Budget is one that will make some people in Britain better off, and some worse off.
According to the Institute for Fiscal Studies, it is likely to squeeze 13 million families across the UK, with some losing as much as £1,000 a year because of the changes being made to the current tax credit system.
So what are the key changes?
Well, the personal tax allowance - the threshold at which people start to pay income tax - has been raised from £10,660 to £11,000 from next year. The government has also pledged to boost this to £12,500 by 2020. All good stuff.
In addition, workers aged over 25 will be paid the living wage, which is £7.20 an hour, from April 2016. This means that low-income homes should be better off, but changes made to welfare could cancel out any gains.
The threshold for those earning more has also moved, meaning the 40 per cent rate won`t kick in until your salary reaches £43,000, up from £42,385.
Osborne has slashed £12 billion from the UK`s welfare budget, which will have a huge impact for many households. For the first time ever, tax credits and family benefits under the umbrella of Universal Credit will be limited to the first two children.
To give you an idea of how many families would be affected, HM Revenue and Customs estimates that there are currently 870,000 households with more than two children claiming tax credits.
From April 2016, the income threshold for which you can claim tax credits will drop from £6,420 to £3,850.
The new Budget will also see most working-age benefits frozen for the next four years, while Employment and Support Allowance payments will be reduced to match Job Seekers Allowance, slashing £30 from claimants` weekly allowance. This will affect around 492,000 people.
In addition, individuals aged between 18 and 21 will no longer be automatically entitled to receive the Housing Benefit - something that could prevent many young people moving out of their family home to live on their own.
Those living in social housing at the moment may be affected, as those earning £30,000 or more annually will have to pay more in rent. Meanwhile, rents will increase for anyone living in properties owned by a council or housing association by one per cent every year between 2016 and 2020.
Finally, the chancellor has also introduced a cap on the amount you can earn through benefits, cutting this from £26,000 to £23,000 in London and £20,000 elsewhere in the UK. However, this will not include Working Tax Credits, Disability Living Allowance or Personal Independence Payments.
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