It’s going to be a pretty big year for personal finances. As the Government continues its attempts to cut the deficit and encourage growth, this inevitably involves cutting the amount of money many Brits have in their pocket.
But there’s good news as well as bad coming in 2013 – with some changes saving Brits hundreds of pounds.
And it doesn’t matter how old or young you are, how rich or how poor, everyone will be affected. So here’s what’s happening and what it will cost or save you.
2013 is the year the Government begins the rollout of its new benefits scheme, the Universal Credit.
Following a trial in the north-west in April, this will be launched nationally for all new claimants in October. After that, existing claimants will be gradually moved onto the system between 2013 and 2017.
This payment is designed to simplify the complex benefits system and make sure that work always pays. Unlike some benefits that are cut the moment you’re in work, Universal Credit tapers off as you earn more – for every £1 you make, you lose 60p of the benefit.
It replaces Income-based Jobseeker’s Allowance, Employment and Support Allowance, Income Support, Child Tax Credits, Working Tax Credits and Housing Benefit. That means it will be received by both working and non-working households.
However, there are some concerns. An impact report from the Department for Work and Pensions suggests that 2.8 million households will receive less money as a result.
There are also fears that vulnerable people will struggle to manage a monthly rather than weekly payment, especially as they need to pay their own rent – landlords will no longer be paid directly by the state.
[Related link: Benefit reform: all you need to know about the Universal Credit]
Until 2013, all parents and guardians of children receive a regular payment of £20.30 a week for the first child and £13.40 a week for any other youngsters.
Due to a three-year freeze, that amount will not rise next year, regardless of how high inflation is. However, some families are about to lose a lot more.
On January 7 2013, high earners will lose some or all of their Child Benefit. It goes from being a universal benefit, to one that is sharply cut in homes where an adult earns more than £50,000 a year.
It’s being cut on a sliding scale; for every £100 you earn above the £50,000 mark, you lose 1% of the payment.
That means that if an adult in the household earns in excess of £60,000, that family will lose all their Child Benefit. Yes, that does mean that a family with two parents earning £49,000 each will still receive it, whereas a family with one stay-at-home parent and one parent earning £60,000 will lose it.
If you’re affected, the taxman will have written to you, inviting you to either stop receiving the payment, or receive it but declare it in your tax return so that the money can be clawed back.
There’s more information available on the HMRC website.
For some households, this could be one of the toughest changes in 2013. From the 15 April, there will be a limit to the amount that working-age people can receive in state help, no matter how many children they have.
This cap is set at £350 a week for a single adult with no children and £500 a week for a couple or single parent.
It’s being rolled out across households that receive Housing Benefit first. If you don’t receive Housing Benefit but will be affected by the cap, it will be applied when you’re moved onto Universal Credit.
If you’re entitled to Working Tax Credit or you’re receiving Disability Living Allowance (or the new Personal Independence Payment), then you’re not affected by this cap.
The Government has launched a benefit cap calculator to help people work out if they’re affected.
Personal tax allowance
Good news! Many workers will find they pay less income tax, as the personal allowance rises to £9,440 in April.
That’s actually £235 more than the Government originally announced, close to double the amount when they came to power, and means that the amount people can earn before they pay tax will have risen by £1,135 compared to April 2012.
So everyone earning more than that will see themselves £227 better off a year – or £18.92 a month – as a result.
However, there was a freeze point at which workers start paying 40% tax has been kept at £41,450 – rather than rising with earnings or inflation.
Another bit of good news! Despite the Government spending cuts, George Osborne has agreed to increase the ISA allowance for the 2013-14 tax year.
It’s going up to £11,520, of which up to half can be saved as cash.
[Related link: Compare Cash ISA rates online]
From April, the state pension will rise to £110.15 a week, which is a hike of 2.5%. That’s an extra £2.70 a week, and a bigger rise than average earnings or anyone on benefits will see, but there’s real concern it’s still not enough.
The Office for National Statistics has announced that the Consumer Prices Index measure of inflation rose to 2.7% in October. But that rise hasn’t yet factored in the recent hikes in energy bills, which are a huge cost for many pensioners.
In fact, there’s some suggestion that inflation is likely to reach 3% in the next few months, leaving pensioners facing a cut in their real income.
Even if you’re not affected by the benefits cap, there’s another squeeze ahead for Housing Benefit.
From April next year, social tenants will see their housing benefit cut if they’re occupying a home that’s larger than they need.
It’s been dubbed the “bedroom tax” because it’s a reduction in the amount you can claim based on any unoccupied rooms. If you have one spare bedroom, you’ll be docked 14% of your benefit, and two or more means you’ll lose 25% of your benefit.
Bear in mind that you’re not entitled to one bedroom per person – it’s one for each adult couple or person over 16. Two children of the same sex aged under 16 are expected to share a room, and two children under 10 are considered able to share a room regardless of their gender.
Disability Living Allowance
It’s all change in 2013 for anyone of working age who’s receiving DLA. The benefit is being scrapped in favour of a new system of Personal Independence Payment (PIP), which is based on an assessment of individual need.
From April 2013, new claims made in the north-west and north-east of the country will automatically be assessed for PIP instead of DLA and that will be rolled out to new claimants in the rest of the country from June.
Then, between October 2013 and March 2016, people receiving DLA will be asked to make a claim for PIP instead, and will be freshly assessed against the new entitlement criteria.
Some people have accused the Government of using this as an excuse to make savage cuts to the benefits of society’s most vulnerable, especially as the contract for assessing claimants has been awarded to ATOS.
There’s an ePetition to sign if you’re opposed to the change.
What do you think? Will these changes benefit society or are some groups being unfairly targeted? Share your thoughts in the comments below.