So will your personal finances

Now is the New Year again. Hopefully you have had a good 2015 and look forward to 2016. A new year often means some economic changes of various kinds and so this year as well. Now much of the government’s autumn budget is becoming a reality and we are going to go through the most important things that affect your personal finances in 2016.

At the turn of the year, a number of changes have been made as the government’s autumn budget has now started to apply in most cases. This is essentially the same budget that the government presented last fall when they encountered problems and the Alliance’s budget was voted on instead.

Many of the things they wanted to get through already had to wait until the autumn and the new budget and now at the turn of the year many changes have come into effect. Quite a few of them may come out in your wallet in one way or another. A little more precisely what happens before the new year, we will go through here.

Taxes

Taxes

The job tax deduction is changed in such a way that it is reduced by three percent. This applies to income over USD 50,000. For income over USD 123,000, the job tax deduction is completely abolished.

The lower limit for paying state tax would have been increased, but this increase would not be possible. The limit would have been at USD 37,900 but will now remain at USD 36,900 instead. The difference in tax will be about USD 113 extra to pay for those who earn above the limit.

For pensioners, there will be some changes to the tax. For pensioners with pension income of at most USD 20,000, the tax will be lower (somewhere around USD 100 – 250 per month depending on pension). If you have a higher pension than this, there will be no difference. There will also be a special payroll tax of 6.15 percent for those who have reached the age of 65 and who are charged on income from work. The tax is paid by employers or self-employed persons.

Saving

Savings

Last year, the deduction for pension savings was reduced from USD 12,000 to only USD 1,800. Now you take the last step and completely abolish the deduction. This means that you can no longer make any tax deductions for money that you pay into private pension savings in pension insurance or IPS.

Most people have already stopped depositing money there or have substantially reduced their deposits, but there are still some that continue. This is silly when you are double taxed on the money because you can no longer get a deduction. Instead, choose to save to the pension on an ISK (Investment Savings Account), which is cheap and flexible, or a capital insurance.

For 2016, a little has also been changed in how to calculate the cost of ISK and capital insurance. New is that you take the Government loan rate for November the year before (which was 0.65% in 2015) and add another 0.75% and that is multiplied by the value of the account.

This is called standard income and you then estimate 30% of this amount. However, the minimum threshold for standard revenue is always 1.25%. This year’s standard income is 1.4%, which means that we will receive a flat rate tax of 0.42% for 2016. This is a pretty big increase from last year (which was incredibly cheap, to say) but is actually still really cheap.

 

Higher tax on fuel

Higher tax on fuel

From January 1 this year, the tax has been increased by about 57 öre per liter of gasoline / 65 öre per liter of diesel (including VAT). You have probably already seen increases in gas stations / stations around the country. This can of course affect your wallet both directly (by paying more for fuel) and indirectly in the slightly longer term, for example by making it more expensive with transport.

Root and box deductions

The root deduction is lowered somewhat from 50% deduction to 30%. The old ceiling of USD 50,000 per year will still remain. However, the grid deduction is changed by lowering the ceiling to half the amount, ie USD 25,000. If you are 65 years or older, you can still keep the ceiling of USD 50,000. Also, you can no longer make deductions for cooking, homework help, bartender services and pool cleaning etc.

Keep in mind the following. Even if you got work done in 2015, you have to make use of the new rules if you have or have to pay for these services in 2016. In order to be able to take advantage of the old slightly more advantageous rules, you must have paid for them before the turn of the year .

Mortgage requirements on mortgages

mortgages

There has long been talk of introducing a mortgage repayment requirement which means that you have to repay your mortgages to at least 50% mortgage rate and at a certain rate at least etc. These requirements have been delayed several times due to some problems. Now, however, it seems that it will get rid of this year.

According to the Government’s bill, the Swedish Financial Supervisory Authority will be able to decide on such a requirement. It looks like it may take effect May 1, which gives you a little extra time. The repayment requirement would apply to all new mortgages, but it is conceivable that the requirement does not apply to the purchase of newly-manufactured housing.

Furthermore, such a requirement can be a first step in a measure of measures to reduce Swedes’ indebtedness. Other measures could be, for example, reducing the tax deduction on the interest rate or introducing a so-called debt-to-income ceiling that would determine that you may at most borrow a certain number of times your available annual income. These measures have not yet been determined, but if they are introduced they can have quite a big impact on the purchase of housing and the size of the loan.

Children, youth and students

Children, youth and students

For families with children, it can be good to know that the basic level of parental benefit is raised from USD 225 to 250 per day for those with low incomes.

Prescription drugs should be free of charge for children under 18 years. You can also get financial support for glasses for children between 8 and 19 years. At the same time, the municipal custody allowance disappears.

For young people working, it may be interesting to know that the reduction of social security contributions for young people will disappear on 1 June. This of course affects employers in the first place, but may result in it being more difficult to afford to hire young people and this especially affects certain industries.

Students who have student loans can enjoy a lower interest rate on existing loans. Last year the interest rate was only 1%, which is very good, but now it is even lower. The government has set the new interest rate for student loans at only 0.6%, which should be the lowest interest rate ever. The interest rate for these loans has been lowered for seven consecutive years. However, it is not certain that your payments to CSN will be smaller, but more that you will pay a slightly larger share in amortization and a little less in interest. It gets favorable in the long run.

 

Unemployed / sick leave

Unemployed / sick leave

For the unemployed, it is of interest that the ceiling in the unemployment fund is increased from USD 18,700 to USD 25,025 per month. This reform came into effect as early as last fall, but will of course be a rather important point this year as it has a great impact on the unemployed.

As unemployed people should be able to get 80% of their previous income, but the upper limit for this was previously USD 17,800 (that is, they had to count on 80% of USD 17,500 at most). Of course, many people have had a higher income than when they worked and thus lose some of their old wages. The new ceiling is thus USD 20,025, which is a lift of about USD 5000 in fair money.

The far-reaching limit in health insurance should now be eliminated. This will take effect on February 1, 2016.

Compensation for sick-leave unemployed is also increased from USD 486 to USD 543.

Quick summary

You can say that the changes made before 2016 are about what can be expected from a Social Democratic government. The focus is on giving a little more money to, for example, pensioners and the levels are increased in the parental insurance while trying to do undesirable things that have been favorable for those with slightly higher incomes.

On the whole, however, it can probably be said that there will be clearly more minus in the wallet than it will be plus for 2016, when big things such as increased tax on fuels, the abolition of reduced social fees for young people and changes in root and grid deductions etc can come to influence a great deal, both individually and in the longer term, in terms of unemployment and small business.

At least it seems that the low mortgage rates will remain at the same levels even during this year and this makes it cheap to borrow and cheap to have existing loans. However, prices in the housing market can probably remain high even in the future, partly because of precisely low interest rates but also because of housing shortages and high demand etc. Electricity prices also look stable.

 

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