Will you be better off in 2016?

It's only a couple of months since Brits finally regained the living standards we were enjoying before the financial crisis. And even this is an average: while retirees are better off, workers are still poorer than they were in 2007.

Chancellor George Osborne recently claimed that his budget changes this year meant that the 'typical' family would be £2,000 a year better off; but financial experts from the likes of the Institute for Fiscal Studies (IFS) and Resolution Foundation have suggested that, in fact, some of Britain's poorest families will end up £1,300 a year worse off.

So how will your finances look in 2016? We look at some of the changes in store.

Pay

The big news on pay in 2015 was the announcement of the new 'living wage', which will come into effect in April. The minimum hourly rate for workers aged 25 or older will rise from £6.70 to £7.20.

However, this may not mean much more money in workers' pockets, with many employers planning to cut back on bonuses or overtime, make redundancies or move towards employing more under-25s.

Overall, though, say consultants Korn Ferry Hay Group, salaries are expected to rise by 2.5% next year; combined with an 0.2% rate of inflation, this means that wages should give 2.3% more spending power.

"The majority of UK employees should feel optimistic. Despite the fact that we're still catching up after several post-recession years of shrinking real wages, there will be a tangible increase in real income for many," says consultant Adam Burden.

Fuelled by the introduction of the living wage, Hay expects wages in the consumer sector to rise by 3%; meanwhile, over a million council workers will get a new two-year pay deal in April, worth 1% a year for most.

Cost of living

This year has seen phenomenally low rates of inflation, varying between 0.1% and minus 0.1% - and the good news is that Bank of England governor Mark Carney expects inflation to stay below 1% until at least the second half of this year.

And this doesn't just mean that prices will stay low, it means that interest rates probably will too - good news for mortgage holders, but not for savers.

Meanwhile, the supermarket price war shows no signs of abating, and petrol's down to under £1 a litre - lower than it's been in years. Analysts predict that the price of oil is going to stay low, and could even fall further. This means not only lower prices at the pumps but also cheaper consumer goods, because the decreased cost of transport.

Tax

The tax-free Personal Allowance will rise from £10,600 in 2015-16 to £11,000 next April. This, according to the Treasury, means that a typical basic rate taxpayer will be £905 a year better off in 2016-17 than in 2010.

The 40% higher rate tax threshold will rise by £615 to £43,000 at the same time.

Scottish taxpayers, though, don't know what to expect when the Scottish parliament takes control of its income tax in April.
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Tax credits

There's been a narrow escape for many in terms of tax credits, with George Osborne making a U-turn over planned cuts late last month.

The government had been planning to reduce the threshold at which tax credits start to be removed and make them taper off more steeply beyond that point in a move that would have left 13 million people hundreds of pounds worse off.

Around three million of the poorest families would have lost more than £1,000 a year, the Institute for Fiscal Studies warned.

Nor, now, will tax credits to parents be limited to two children.

However, Labour has claimed that the 'smoke and mirrors' spending review will still leave working families £1 billion worse off next year. A single parent of two children working full time on the minimum wage and receiving universal credit will lose £2,400 next year, the party claims.

Benefits

Thanks to a fall in the Consumer Prices Index, all the main benefits, including disability benefits and statutory payments, will be frozen.

Meanwhile, the benefit cap for couples and those with children will be reduced from £500 a week to £442 in London and £385 a week elsewhere. For single people, it goes down from £350 a week to £296 in London and £258 elsewhere.

And while non-disabled, childless Universal Credit claimants can currently earn up to £111 per month without their UC being affected, from April their UC will be reduced as soon as they start earning. For the small number of other people on Universal Credit, the work allowance is being reduced.

Social housing

From April 2016 social housing rents will be reduced by 1%, or in some cases frozen, for four years.

Pensions

Pensioner benefits are excluded from the benefit freeze and will be protected by the 'triple lock'. This means that the basic state pension will rise by £3.35 a week to £119.30 from April.

At the same time, those reaching pensionable age will receive a new, 'single-tie'' pension with a starting rate of £155.65; but will need to have made 35 years' worth of National Insurance contributions or credits to get the full amount.

Those with fewer than 35 qualifying years will receive a pro-rated amount, as long as they have at least ten qualifying years.