What the Queen's Speech means for your finances
An income tax boost for low-earners, a reduction in the benefits cap and the extension of Right to Buy have been announced in the Queen's Speech.
People earning the minimum wage and working 30 hours or fewer a week will be lifted out of income tax permanently from the start of the 2016/17 tax year on 6 April 2016.
Officially opening parliament for the first time since the Tories took sole control of the country, and speaking on the new government's behalf, the Queen said: "We will also reward work by letting people keep even more of the money they earn - for the first time putting it into law that the Minimum Wage is and always will be tax free.
In announcing the reduction in the annual benefits cap for non-working households, from £26,000 to £23,000 (the equivalent to gross family earnings of up to £29,000), Her Majesty added: "Our reforms will incentivise work – so people are always better off after a day at the office or factory than they would have been sitting at home.
"That's true social justice - not handing people benefit cheque after benefit cheque with no end in sight, but turning workless households into working households; the misery of unemployment into the purpose and dignity of employment; and the welfare system into a lifeline, not a way of life."
Benefits will also be frozen for two years from the start of the 2016/17 tax year, which begins on 6 April 2016. These include all working-age benefits, such as Jobseeker's Allowance, as well as tax credits and Child Benefit. However, the government will protect pensioner's benefits and statutory maternity, paternity and adoption pay will be excluded from the freeze.
It was also confirmed that the amount of free childcare families will receive for three- and four-year- olds will double to 30 hours a week from 2017.
The government reiterated its commitment to extending Right to Buy to housing association tenants and forcing associations to dispose of high-value vacant council houses in order to help pay for it.
However, experts aren't convinced by the merits of extending Right to Buy. Homeless charity Shelter stated: "Shockingly, 863 social rented homes have been sold in Greater Manchester since 2012, when the promise of one-for-one replacements was first made. Yet of those only two have been replaced: two connected semis on a cul-de-sac in a Wigan suburb."
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.