What is the Budget and how does it affect me?

Last updated at 08:40
The current Chancellor of the Exchequer, Philip Hammond
The current Chancellor of the Exchequer, Philip Hammond

The Budget is the government's yearly announcement about how it's going to spend the nation's money.

Normally there is one Budget each year - in 2018 it will be on 29 October.

The Budget is worked out by the person in charge of the country's money, called the Chancellor of the Exchequer, with help from their office, which is known as the Treasury.

The current Chancellor of the Exchequer is Philip Hammond.

Why do we have a Budget?
Copies of the 2016 Budget speechPA
The Budget is an important speech made by the Chancellor of the Exchequer

Just like you decide how to spend your pocket money, the government has to decide how to spend money on services like schools, hospitals, the police and housing.

The government needs to work out how much money it has in the bank, so it can work out how to spend it on the country.

What's the red briefcase about?
Chancellor George Osborne holding the briefcase ahead of the March 2016 Budget
On Budget day, the Chancellor will be seen carrying a red briefcase. Here is the former Chancellor George Osborne holding the briefcase ahead of the March 2016 Budget

Usually on the day that the chancellor will make the Budget statement, you will see them waving around a red briefcase. It traditionally contains the Budget speech.

The original red briefcase was first used by politician William Gladstone in 1860.

But in 1997 a new one was made as the old one was looking a bit tatty!

Where does the money come from?
MoneyGetty Images
The government gets its money from different types of taxes

The government gets its money from different types of taxes:

Income tax: Everyone in the UK who earns money has to pay some of that money to the government. Most people have to pay about a fifth, but richer people pay more.

VAT: You pay tax when you buy things. You may not realise it but 20% of the cost of many things goes to the government as VAT (Value Added Tax).

Duties: These are extra taxes charged on certain things like cigarettes, alcohol and petrol. Most of the money people pay for these goes to the government as 'duty'.

Does it affect me?

You might not think it, but the Budget does affect your life.

The chancellor may decide to spend more or less money on schools and they may also choose to spend money on youth schemes in your area.

Adults may find they have more or less money to spend - which could mean more or less pocket money for you!

What happens on Budget day?
Philip HammondUK Parliament/Mark Duffy
Here is Philip Hammond delivering a previous Budget speech

On the day itself, the chancellor makes their speech to members of parliament (MPs) about how they're spending the government's money.

People can also watch it on television to see what he or she says.

The chancellor will try to explain why they may be raising or lowering taxes, and speak about the country's economy.

At the end of the speech, MPs discuss the Budget, then vote on whether or not to accept it.