How new Conservative policies will affect your wallet

Last week the Conservative party won a majority in the general election. It is the first time the party has held a majority in the House of Commons for 18 years and means David Cameron and his MPs will no longer have to trade off their policies with the Liberal Democrats.

So, what does a Conservative majority government mean for your finances?

Income tax

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The Tories pledged during the election to continue to raise the tax-free personal allowance. It is currently £10,600, up from £6,475 in 2010. The aim is to get it to £12,500 by 2020.

Another election promise was to raise the 40 per cent income tax threshold from its current level of £42,385 to £50,000.

The Conservatives have also promised to bring in legislation to prevent any increases to income tax, national insurance and VAT within this parliament.

Inheritance tax

Families could benefit from a plan to increase the inheritance tax threshold. The Tories have said they will increase the tax-free allowance from £650,000 per married couple to £1m. The details haven't been released but the belief is this will be done by creating an extra allowance of £175,000 per person that will apply to your main home.

First-time buyers

In the Autumn the new Help to Buy ISA will be launched. This will allow first-time buyers to save up to £12,000 tax-free with an extra £3,000 added to help them get on the property ladder. However, you can only start the ISA with £1,000 and then add £200 a month so you'll be preparing to vote in another general election by the time you've saved up the full £15,000.

Pensions

It's a mixed bag of news when it comes to your retirement income. Good things will remain, including the 'triple lock' that means state pensions rise by at least 2.5 per cent each year, free bus passes, winter fuel payments and free TV licences for the over-75s.

But, if you have a generous pension provision it could be bad news. The Conservatives have plans to introduce a new policy to limit pension contributions from £40,000 a year to £10,000 for anyone who earns over £150,000. The lifetime allowance – the maximum you can put in your pension pot – will also be cut from £1.25m to £1m.

It also remains to be seen if new Pensions Minister Ros Altmann will continue her predecessor Steve Webb's plan to allow pensioners to be able to sell their annuities.

Household bills

While fuel duty will be frozen there isn't going to be a cap on energy bills as championed by the Labour party.

However, the Tories will also be clamping down on loopholes that allow rail firms to increase some fares. Currently regulated rail fares – around half of all ticket prices – rise each January by 1 per cent above RPI. But, a flex rule has meant train firms can increase individual fares by as much as 5.5 per cent as long as the overall average rise stays at RPI plus 1 per cent. This rule will be scrapped.

Benefits

In order to reduce the budget deficit benefits will continue to be cut. The Tories have pledged to reduce the benefit bill by £12bn by 2017-18 with only pensioners' benefits protected.

This will mean big cuts to working-age benefits, including a reduction in the benefits cap from £26,000 to £23,000, possibly a cap on the number of children for which you can claim child benefit and also stripping under 25s of housing benefit if they are receiving job seekers' allowance.