A round up of the Autumn 2021 budget
The Autumn 2021 budget has been announced. Our easy to digest post helps you understand how it will affect you.
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The Autumn 2021 budget has been announced. Our easy to digest post helps you understand how it will affect you.
Back to NEWSHaving already kicked up more than a little controversy, the Autumn 2021 Budget is on course to cause more drama than most. MPs are disgruntled that they have not been consulted as ministers, having been given press briefings on what’s in the budget before MPs were given the chance to see the policies.
Controversy aside, it’s important to view this budget in the right light. The spring 2021 budget was very heavily tied to recovery from the coronavirus pandemic. This budget will be more of a marker of how the government plans to run the country financially going forward.
The Chancellor’s Autumn Budget and Spending Review is often seen as big headline-grabbing numbers, but behind these numbers lie the real impacts on how we all live our lives. How much money you have in your pay packet, how much you can save and invest, and the ways the government plans on helping you and your family, can all make genuine and lasting changes to how you live, save, and invest.
Onwards, then, let’s take a look at what, for the second time in 2021, Chancellor Rishi Sunak’s budget contains.
As is customary, Rishi begins with the good news. The damage to the economy from the Covid-19 crisis was less than feared. Growth in the economy is stronger and faster than thought. Businesses are employing more people and paying wages at better rates. Thanks to this, the Chancellor says, this will be a budget that spends and invests.
He tempers this hope with a word of caution on inflation. The Consumer Price Inflation (CPI) is forecast to be 4% this year due to high demand, a global delivery backlog, and higher energy prices.
Rishi Sunak puts a strong emphasis on “levelling up”. This handy phrase, a trademark of the current government, will see this budget try to address some of the inequalities in the way that the wealth is distributed in the UK. So, all in all, this budget promises a lot but as always, we need to dig deeper to see how it will affect you personally.
Job Hunters: This budget is good news for people just starting out or looking for their first job. Much of the budget was aimed at investment in the business sector, with science, innovation, and technology taking a front seat. If you’re planning on entering any of the STEM industries, you are entering a sector on which the government is pinning many of its post Covid and Brexit hopes.
Minimum Wage Increase: For those entering other sectors, the national minimum wage for 23 years old and over rises to £9.50 an hour, a rise of 59p. Full-time workers will see an extra £1,074 per year. The minimum wage for younger workers also rose. Those aged 21-22 will see a rise from £8.36 to £9.18 while the Apprentice Rate will increase to £4.81 from £4.30.
Housing: There was a focus on getting new affordable housing built, which may be good news if you’re yet to get your foot on the housing ladder.
Alcohol Duties: The duty paid on alcohol was changed pretty radically in an attempt to help ailing pubs and restaurants. You may see prices on your favourite drinks go down a few pence, assuming the rate cuts aren’t overawed by the rise in inflation and rising industry costs.
Families will be happy to see some more investment in schools, along with facilities for young people in the community, such as youth clubs and football pitches.
If you own a business in the retail, hospitality or leisure sectors, you’ll see a 50% business rate discount. Businesses, in general, will enjoy the business rates multiplier cancellation, worth £4.6bn over the next five years. Dividend tax rates increase by 1.25% from April 2022 but the dividend allowance, £2,000, is unchanged. This will affect Trusts with the dividend rate increasing in line with the additional rate to 39.35%. Overall this budget was not aimed at smaller businesses, focussing instead on larger national and international concerns in specific industries.
Benefits: The taper rate cuts in Universal Credit move from 63% to 55%, a change worth £2bn. The work allowance will also be increased to £500. However, this comes hot on the heels of the end of a £20-a-week uplift on universal credit from the last budget.
VAT: The thresholds remain at £85,000 and £83,000 of taxable turnover and will continue at that rate until 2023/24. The standard and reduced rates remain at 20% and 5% and a further reduced rate of VAT of 12.5% applies to certain supplies made in the hospitality and tourism sector between 1 October 2021 and 31 March 2022. From 3 November 2021 there will be an additional element to the VAT free zone model.
Cars: A planned fuel duty rate rise was scrapped, this seems to happen in almost every budget! The car and van benefit charge increases, from April 2022, in line with the consumer price index.
There was very little news for savers and investors in terms of rates. As always the budget contained action points that show where the government is looking to invest, which may point to the investment strategy in a wider sense. In many ways this is good news for people planning their finances.
Savings: The starting rate tax band for savings income, £5,000, is unchanged until 2022/23. This will benefit savers with more than £12,570 (the personal allowance) as they will be able to save an additional £5,000 at 0% tax. The savings allowance is not available if your other income is £17,570 or more.
Pension lump sum: The minimum age at which you can access your pension has increased from 55 to 57 with effect from 6 April 2028.
Tax: Savers and investors feared an increase in Capital Gains Tax, there was no mention of this, although the changes to dividend taxes, as part of the government’s plan to fund health and social are, will impact on people over the next five years. This is expected to raise over £3 billion in taxes over the next five years. There has never been a more important time to ensure savings and investments are tax efficient as possible, utilising tax wrappers like individual savings accounts (ISAs) and self-invested pension plans (SIPPs). Business owners too need to ensure they withdraw money from their business tax-efficiently as costs increase.
This was a budget focussed on a redirection of effort by the government. Spending on public services, infrastructure, health and education all point to a budget that aims to take some of the pressure off the public sector.
If you fancy a deep dive into Chancellor Rishi Sunak’s Autumn Budget & Spending Review 2021 Speech, you can get the full transcript here.
Author & Editor: Cherie-Anne Baxter
Date: 28th October 2021
