8 Budget 2021 predictions – how they will affect your finances
CHANCELLOR Rishi Sunak will deliver his Budget this week, announcing a raft of measures to get the economy back on track after coronavirus Here are the announcements that could be coming – from taxes to help buying a home – and how they can affect your finances. Mr Sunak will deliver his speech on Wednesday […]
CHANCELLOR Rishi Sunak will deliver his Budget this week, announcing a raft of measures to get the economy back on track after coronavirus
Here are the announcements that could be coming – from taxes to help buying a home – and how they can affect your finances.
Read our Budget 2021 live blog for the latest news & updates
Mr Sunak will deliver his speech on Wednesday March 3 to Parliament at around 12.30pm.
He will also give a press conference afterwards, taking questions from the public and press in a first for the chancellor.
And Mr Sunak will later be grilled by Martin Lewis on the money expert’s TV show this week.
The chancellor faces a tough balancing act.
He needs to provide ongoing support for those who’ve lost their jobs and businesses hit by coronavirus.
But he also needs to “balance the books” and bring in more money to the Treasury to support these schemes.
Prime Minister Boris Johnson said today that he was confident the Budget would “build on everything we have done” to look after businesses and the public throughout the coronavirus crisis.
What is the Budget?
THE Budget is when the government outlines its plans for tax hikes, cuts and things like changes to the minimum wage.
It’s different to the Spending Review, which sets out how much public cash will go towards funding certain departments, devolved government’s and services, such as the NHS.
The Budget is read out in the House of Commons by the Chancellor of the Exchequer. It will be Rishi Sunak’s second Budget as Chancellor.
Mr Sunak’s first one in March last year has been dubbed the “coronavirus Budget” after it focused on supporting Brits financially through the crisis, rather than the government’s “levelling up” agenda as promised in the 2019 general election.
Normally, the Budget is held once a year but the unprecedented circumstances of the pandemic in 2020 saw Mr Sunak give a “mini-budget” in the Commons on July 8
“I’m not going to anticipate what the Chancellor is going to say on Wednesday,” the Prime Minister told reporters.
“But I am absolutely confident that it will be a Budget that builds on everything we have done to look after the businesses and the people of this country throughout the pandemic.
“But that also paves the way for a strong, jobs-led recovery. That’s what our focus is going to be on.”
Of course, we won’t know for sure what’s in the Budget until the announcement itself, but we’ve looked at what the chancellor is expected to say and how that could affect the money in your pocket.
1. Stamp duty holiday extension
What is it?
Stamp duty is the tax you pay when buying a home. A holiday was introduced to help boost house buying at the height of the pandemic last year.
It means that buyers in England and Northern Ireland do not have to pay stamp duty on homes under £500,000 – usually it is under £125,000, but can be higher for first-time buyers.
What’s expected?
This holiday was due to end on 31 March but now it will be extended until the end of June, the Chancellor is set to announce.
What does it mean for your money?
Anyone buying a home will now have more time to complete their purchase and take advantage of the tax saving.
Buyers who failed to complete before the deadline would have to find as much as £15,000 to cover the tax.
2. Furlough extension
What is it?
Millions of workers have been supported by the furlough scheme during the coronavirus pandemic.
It has been extended several times already and currently pays workers 80% of wages for hours they are unable to work, up to £2,500.
What’s expected?
It’s dues to finish at the end of April but Mr Sunak is expected to extend the scheme again.
This Coronavirus Jobs Retention Scheme as it’s officially called could continue until Autumn, according to reports.
What does it mean for your money?
It will be a relief for employers and staff who waiting to open their businesses again.
The government has set out a roadmap for reopening after the lockdown, depending on the coronavirus infection rates and deaths.
An extension of the scheme means furlough is likely to continue until all restrictions are lifted on 21 June, and potentially beyond.
Here’s everything you need to know about the furlough scheme.
3. Next grant for the self-employed
What is it?
While furlough has supported staff wages, the grant for the self-employed has covered lost income of many people who work for themselves.
There have been three SEISS grants so far and there will be a fourth covering lost income over February, March and April.
What’s expected?
The full details of the fourth SEISS grant are expected to come in the Chancellor’s Budget announcement.
This will include how much it is, who is eligible and when applications open, according to Martin Lewis.
It’s hoped that more people will be able to apply for the latest grant as some people newly self-employed will now have filed a tax return.
What does it mean for your money?
The self-employed should get a firm idea of the cash they’ll get to support them through the next few months.
What help is out there for businesses and self-employed workers?
THE government has introduced the following measures to help self-employed workers and businesses during the coronavirus outbreak:
Rent support: Businesses who are struggling to pay their rents are protected from eviction until the end of March 2021.
Coronavirus business interruption loan scheme: SMEs can get loans and overdrafts of up to £5million for up to six years and the government will guarantee up to 80 per of these.
Bounce back loans: Businesses can apply for loans worth up to £50,000. The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
Grants of up to £10,000: Small firms can get grants of up to £10,000 to help with ongoing business costs.
Tax bill help: SMEs that cannot afford their tax bills can ask HMRC for a “time to pay” arrangement so any debt collection is suspended.
Business rates holiday: A 12-month business rates holiday has been introduced for many businesses.
4. Mortgage guarantee scheme
What is it?
A new scheme to support people buying a home will be unveiled by Mr Sunak, it’s been revealed, in an attempt to turn “generation rent” into “generation buy”.
The government will back mortgages for buyers with a deposit of just 5 per cent on homes worth as much as £600,000.
These types of mortgages where buyers have a small deposit and requires a larger mortgage are deemed riskier by banks.
Many lenders pulled these riskier mortgages in the wake of the coronavirus pandemic – there were just eight with a 95% loan-to-value (LTV) in January, 2021, according to the Treasury.
What’s expected?
The full details of the scheme will be announced, including who’s eligible and how you can apply.
What does it mean for your money?
Anyone who’s buying ta home and has struggled to get a mortgage could find the scheme supporting their leap onto the property ladder.
It will not be restricted to first-time buyers and you can read about what we know about the scheme so far here.
5. Income tax freeze
What is it?
This is the tax you pay on money you earn. Most people get a personal allowance – a certain amount you can earn each year tax-free.
Currently that’s £12,500 and after this you pay 20% tax on anything you earn up to £50,000 and then 40% on anything over that.
What’s expected?
Changes to income tax thresholds are usually announced in the Budget and in previous years the thresholds have increased.
But this year Mr Sunak is expected to freeze the personal allowance and keep keeping the thresholds at which people start paying the basic and higher rates of income tax at £12,500 and £50,000 respectively
And this could be the case for at least three years, in order to raise £6 billion from taxpayers.
The rates – 20% basic and 40% higher – are not expected to change.
What does it mean for your money?
The thresholds for income tax generally rise each year so that people can earn more without paying more tax.
The government has previously set out plans for the thresholds to increase in line with inflation, which would take the personal allowance to £13,310 and the higher rate tax threshold to £53,410 by 2024, the end of the current parliament.
A freeze instead means people won’t benefit from the extra amount they could have earned tax-free, or at the basic rate.
It’s described as a “stealth” tax rise because people will pay more tax than they would have done but there is no increase in the tax itself.
6. Pensions lifetime allowance freeze
What is it?
When you put money into a personal or workplace pension, there’s a limit on how much you can save into it in total known as the lifetime allowance.
Anything over this amount – currently just over £1million – and there are extra charges when taking money from it in retirement.
What’s expected?
Mr Sunak could freeze the lifetime allowance at £1.073,100.
It usually rises each year with inflation, but a freeze over the rest of the parliament means more people will be affected over time.
Again, like with income tax, this would be a stealth tax, bringing in more to the Treasury (an estimated £250m) but without increasing taxes.
What does it mean for your money?
There are relatively few people with more than £1million in their pension point but those who do are likely to be higher earners and those in public service careers where pensions are more generous.
Former pensions minister Steve Webb, now a partner at consultancy LCP, said: “Although relatively few people currently have pension wealth worth over £1 million, if the limit is frozen it will gradually bring more and more people in.
The Sun wants to Make Universal Credit Work
UNIVERSAL Credit replaces six benefits with a single monthly payment.
But there are big problems – it takes five weeks to get the first payment and this leaves some families worse off by thousands of pounds a year.
And while working Brits can claim back up to 85% of their childcare costs, they must find the money to pay for childcare upfront. We’ve heard of families waiting up to six months for the money.
Working parents across the country told us they’ve been unable to take on more hours – or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.
The harsh taper rate also makes it hard for Brits to get back to work.
It’s time to Make Universal Credit work. Since December 2018, we’ve been calling for the government to:
- Get paid faster: The government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop millions from being pushed into debt.
- Keep more of what you earn: The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4million families.
- Don’t get punished for having a family: Parents should get the 85% of the money they can claim for childcare upfront instead of being paid in arrears.
Together, these changes will help Make Universal Credit Work.
Join our Universal Credit Facebook group or email UniversalCredit@the-sun.co.uk to share your story.
7. Universal Credit uplift extension
What is it?
Because of coronavirus, Universal Credit claimants were handed an extra £20 a week on top of their usual amount.
What’s expected?
It is due to come to an end in April but Mr Sunak is expected to announce what will happen to this extra money in future.
The £20 a week uplift could continue for longer until coronavirus restrictions are lifted and things get back to normal.
What does it mean for your money?
If the uplift is extended for longer, it means anyone claiming Universal Credit will get more money – exactly how much depends on how long the extensions is.
Separately the standard rates of UC (without the £20 uplift) will rise in April and by how much has already been confirmed by the government.
8. Cigarette, alcohol and fuel prices
What is it?
Tax rates on cigarettes, alcohol and fuel are usually announced in the Budget each year – these are officially known as Tobacco Tax, Beer duty and fuel duty.
What’s expected?
Mr Sunak has been warned not to increase fuel duty – it’s been frozen for a decade after The Sun launched its Keep it Down fuel duty campaign.
Tax on all alcohol was last year frozen for only the second time in 20 years, meaning no increase in the price of drinks.
This year, the price of a pub pint could fall by 36p as Mr Sunak considers cutting alcohol duty.
But the move, designed to get people back on to high streets after lockdown restrictions lift, could see 14p added to the price of a supermarket.
When it comes to tax on fags, they generally rise each year, pushing the price of cigarettes higher.
What does it mean for your money?
Any change to these taxes usually comes into force the same day.
So you could be paying more for cigs, booze and fuel if Mr Sunak puts up taxes on them, or less if any are reduced, by Wednesday evening this week.
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