How will Brexit affect me and my finances?
Leaving the EU has resulted in many changes to online deliveries, travel, and mobile roaming charges, with potential impacts on other areas of the UK economy. In this guide we look at how Brexit may affect you and your personal finances.
The UK has now left the EU with a trade deal that was agreed on 24 December 2020. Brexit has had a significant impact on businesses, but how could the changes affect your finances?
Deliveries are an area that have been impacted by Brexit, as recipients may now face extra charges to get items from the EU. We explain what these changes are, as well as looking at Brexit’s impact on other things such as banking services, house prices, interest rates, food prices, mobile roaming, and travel.
The following information is primarily for UK residents. If you are a UK expat living in an EU country, you are likely to be affected in other ways. Check the gov.uk website for more details.
The deal between the UK and the EU ensures that there are no tariffs on food and goods traded between the two areas, which should minimise the impact that Brexit has on food prices.
However, some experts warn that there may be a gradual increase in prices, partly because suppliers will have to cope with more administration and border checks when importing/exporting. This could cause a slight rise in prices, but not as large as it might have been if a deal had not been agreed.
Prices can also fluctuate because of supply and demand, so if some suppliers find it difficult to transport their goods to the UK, then their prices may increase further.
Overall, if food prices do rise, it is likely to be a modest increase rather than a dramatic change.
Charges on goods sent from the EU
UK residents ordering items from the EU may have to pay extra fees post-Brexit. There have been many news stories about buyers getting caught out by unexpected fees that have sometimes cost nearly as much as their delivery, but what exactly are these charges?
If you live in Great Britain and order something from an EU retailer, here are the costs you can expect to face:
- For items valued under £135, the EU retailer will need to register for UK VAT and charge tax to the customer at the time of purchase. So, make sure that VAT is included in the total cost you pay at the online checkout.
- For any items (including gifts) valued over £135, you will be responsible for paying VAT and any customs duty, not the retailer. You will be contacted by the delivery company or the Post Office when your goods arrive in Great Britain, with information on how much you owe and how to pay before you can then receive your delivery. You will normally be able to pay online or in-person, and you will need to make the payment within a certain period of time.
- Excise goods (alcohol or tobacco) of any value that you buy from the EU will also be subject to customs and excise duty.
- For gifts valued under £39, you won’t be charged VAT. However, if you receive any gifts that are worth £39 or more, you will need to pay VAT to the delivery company.
VAT will be charged at the standard UK rate, which is 20% for most goods. Excise duty will also be charged at the standard rates, which you can find on gov.uk.
The customs duty you have to pay will depend on the type of goods you order and where they come from, but it could range from 0% to around 20%. To see how much customs duty you could be charged, you can try to find your item here or contact HMRC.
Because of the extra paperwork and checks that EU retailers need to do to send items to the UK, they may charge additional fees which would be included in the overall price of their product. Alternatively, you may find some EU retailers will no longer send items to the UK, at least for now.
UK delivery and postal companies may also charge “handling” fees for the extra time and resources needed to deliver parcels and collect necessary payments. For example, the Post Office charges an £8 handling fee which will be added to the other duties you need to pay.
The above does not apply to deliveries to Northern Ireland, which means that Northern Ireland customers won’t need to pay VAT or customs duties for items sent from the UK or the EU.
There will be some small costs to consider if you’re planning to drive in Europe after Brexit, such as the cost of a UK sticker. From 2022 you may also need to pay around £6.30 for a visa waiver.
However, you won’t need to worry about paying out large sums for emergency medical care when in the EU, as the free UK Global Health Insurance Card (GHIC) will replace the EHIC and cover these costs. But, even with this cover, it is still worth getting travel insurance for more comprehensive cover while on your travels.
If you plan to take your pet abroad, you will also need to pay for a microchip, a rabies vaccination and an animal health certificate before you travel.
Mobile phone roaming
When the UK was in the EU, UK citizens could benefit from free roaming. This meant, whatever EU country you were in, you could use your calls, minutes and data without incurring any extra charges. It was no different to using your mobile in the UK.
However, since leaving the EU, free roaming is no longer guaranteed. Phone providers can, in theory, introduce additional charges for using your phone in the EU as they are no longer bound by the EU roaming regulations.
Many providers have stated that they have no plans to reintroduce roaming charges and that they will keep things as they are, but it is worth checking that this is the case before you go abroad.
The UK government also implemented a £45 monthly mobile data cap that means network providers have to alert you if you go over this limit while abroad. You can then choose to opt in to continue to pay for data if you want. This should help prevent you from unintentionally accumulating a large phone bill when using your mobile abroad.
Operators should also make sure that Northern Ireland phone users don’t get charged for roaming if their phone uses a signal coming from the Republic of Ireland.
On the whole, any financial products you may have, such as bank accounts, credit cards and insurance policies, should not be affected by the UK leaving the EU. If any of your products or services are impacted, your provider should contact you, so look out for any emails or messages from them.
If you use a service or product from a firm authorised in an EEA country, you may be more affected by Brexit.
EEA firms now need to gain UK authorisation to operate in the UK. If they are not already authorised, the Temporary Permissions Regime (TPR) will allow them to continue operating in the UK until they gain full authorisation.
If an EEA-based firm decides to withdraw its services to UK customers, the financial services contracts regime (FSCR) will allow the company to continue with its pre-existing UK business and contracts while it winds down its UK operations.
Whatever option an EEA firm is taking, its UK customers should have received information about what is happening, what has changed about their protections (if anything) and if they need to take action. If in doubt, contact your provider directly.
The Financial Services Compensation Scheme (FSCS), which protects deposits up to £85,000 in an account should the bank or building society go bust, continues as before for UK-based customers of firms registered and authorised in the UK.
FSCS protection may change if the firm is based in the EEA, but you should still be protected by an EEA protection scheme. Your provider should let you know about any changes to your protection.
Making and receiving payments
You can still send payments to accounts in the EEA and withdraw cash when you’re abroad. However, these actions could potentially be more expensive than before Brexit and may take a little bit longer to process.
Banks and payment providers will need to give extra information to authorise payments between the UK and the EEA, including the names of the account holders involved and the address of the person making the payment. If there is any disruption to your banking services, or any extra charges, your provider should contact you.
Fees on card payments
It is possible that UK customers may face slightly higher costs when using a credit or debit card to buy something online from an EU company.
Mastercard announced that from 15 October 2021 it will charge EU firms higher fees when a UK cardholder purchases something from their website, increasing the fee from 0.3% to 1.5% for credit cards and from 0.2% to 1.15% for debit cards. Although this should not directly increase costs for consumers as it’s the retailer that faces these higher fees, there’s a chance that EU sellers will increase their prices to cover these extra costs.
EU legislation previously capped the fees that payment providers, like Mastercard, could charge.
Will interest rates rise after Brexit?
At the end of the Brexit transition period on 31 December 2020, the Bank of England base rate was at an all-time low of 0.1%. However, this rate was driven by the impact of the coronavirus pandemic on the UK economy rather than Brexit.
The base rate influences interest rates on other financial products, such as loans, mortgages and savings accounts, so it has a direct impact on our finances. Lower rates mean we get lower interest rates on savings, but also means it’s cheaper to borrow.
Moving forward, interest rates are likely to be more influenced by the fall-out of the coronavirus pandemic and the UK’s economic situation, with Brexit a less-significant factor. As the UK still comes to terms with the massive economic impact of the coronavirus pandemic, interest rates seem unlikely to rise any time soon.
The Bank of England has even considered moving to negative interest rates. You can read more about the impact of low interest rates and what it could mean for your saving goals and your overall finances.
House prices after Brexit
Leaving the EU is unlikely to have a noticeable impact on house prices, at least in the short-term. At the moment, the stamp duty holiday, the low Bank of England base rate and the wider impact of coronavirus on the economy and employment are having a greater role in determining the value of property.
Since the housing market reopened after the first lockdown in 2020, property prices have increased. This is partly thanks to pent-up demand and the desire for more spacious houses in the country, as well as the incentive of the stamp duty holiday.
However, with the stamp duty holiday finishing and with a predicted rise in unemployment after the end of the furlough scheme, house prices are expected to level off and perhaps fall in 2021.
With all these factors to consider, it is hard to predict whether leaving the EU will have a significant effect on house prices in the coming years.
The above guide shows how leaving the EU could impact your everyday finances. Although some people will be more affected than others, everyone is likely to experience some changes so it is worth being prepared.
For example, before travelling to the EU or ordering from the EU, check that you have all the necessary paperwork and be ready to pay any fees that may apply.
The long-term impact of Brexit on the UK economy is much harder to determine. But, whatever happens, it is key that you don’t act impulsively without fully researching your options or gaining professional advice first.
For more information on how you personally may be affected by the UK leaving the EU, check for any emails or letters from your providers that would explain any changes. Alternatively, they may have more information on their websites.
You can also check the gov.uk website, which will offer more details on what is changing and will be updated with the latest developments.
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Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more