Eight Ways Rishi Sunak's Budget
Could Impact You
Opening his second
budget speech of 2021, the chancellor promised a stronger UK economy. The good
news is the UK is recovering faster than its major competitors from Covid, the
chancellor told MPs.
Rishi Sunak says the
Office for Budget Responsibility (OBR) has revised up its forecasts for UK
economic growth. The OBR now expects gross domestic product (GDP) to expand by
6.5% this year compared to the 4% it forecast at the Budget in March. This is
below what the Bank of England expects - it is predicting 7.4% growth.
Budgets are typically a combination of giving with one hand
and taking with the other – winners and losers as the government does its best
to boost economic growth whilst keeping public spending in check. In reality,
most people will see little difference in their daily lives and must continue
to row their own boat without looking to the government to take care of
everything.
Here are 8 ways you could be affected.
1. Universal credit
boost
If you are working
and in receipt of universal credit top-up benefits, you are probably affected
by what is officially known as the taper rate. That means the universal credit
payment you receive is reduced as you earn more.
Depending on their
circumstances around two million would be better off, but another two million
claimants will see no benefit because they either do not work or do not earn
enough.
It is a significant
policy in tackling the rising cost of living which will be brought in
"within weeks" and no later than 1 December. It comes after criticism
of cancelling the £20-a-week universal credit uplift given during the pandemic
which had benefitted 5.5 million people.
2. Rising cost of
living - inflation
Everyone knows that prices
are going up in the shops and on household bills. The Chancellor confirmed the
cost of living is expected to rise by 4% over the next year, mirroring market inflation
expectation.
The freeze on fuel
duty will continue for at least another year, to help drivers already are hit
by higher prices at the pumps.
About 60% of the
price we pay for petrol and diesel is tax - a mixture of fuel duty and VAT.
No measures to help
householders with rising domestic gas and electricity bills.
3. Minimum wage
increase
As expected, workers
on minimum wages will receive an above-inflation pay rise next April. For those
aged 23 and above the rate - known as the National Living Wage - will go up by
6.6%, as the hourly rate increases from £8.91 to £9.50.
Minimum wage
increases from 1 April:
National Living Wage
for those aged 23 and over: From £8.91 to £9.50 an hour
National Minimum
Wage for those aged 21-22: From £8.36 to £9.18
National Minimum
Wage for 18 to 20-year-olds: From £6.56 to £6.83
National Minimum
Wage for under-18s: From £4.62 to £4.81
The Apprentice Rate:
From £4.30 to £4.81
Public sector staff
will also receive a pay rise in April when the freeze on wages in place during
the pandemic is lifted. How much this amounts to, and whether it equates to
more than the rising cost of living, will be decided at later date.
The government's
official, independent forecasters - the Office for Budget Responsibility - said
that real incomes for everyone would typically rise very slowly in the coming
years. Income rises, after taking into account inflation and changes in tax
will be no higher than 1.5% a year for each year up to and including 2026.
4. Alcohol duty
overhaul
Drinking is getting
more expensive, with pub chains warning that higher wages and energy costs will
mean much higher prices for a pint.
However, Mr Sunak
announced an overhaul which he described as "the most radical
simplification of alcohol duties for 140 years", coming into force in
February 2023.
This will lead to
higher-strength drinks going up in price, but lower duty on drinks ranging from
sparkling wine to draught beer.
The cost of smoking
is rising again, with an above-inflation rise in duty on cigarettes and an 11%
rise in duty on hand-rolling tobacco, taking effect within hours.
5. Your tax bill
Mr Sunak said he
planned to reduce taxes during the rest of this Parliament.
Although announced
before this Budget, two massive tax decisions had already been made that will
affect your money in the coming years.
In the last Budget,
Mr Sunak said the thresholds as which income tax is paid would be frozen at
April 2021 levels for five years (although Scotland has different levels). That
means pay rises will push more people into higher tax bands.
In September, the
government also announced employees, employers and the self-employed would all
pay 1.25p more in the pound for National Insurance (NI) from April 2022 to fund
social care.
6. Flying
The cost of a
domestic flight ticket could be cut, but very long-haul flights could get more
expensive.
That is because the
chancellor has made changes to Air Passenger Duty - a levy paid by airlines,
but ultimately funded by passengers through the cost of their tickets.
7. The cladding
crisis
Many homeowners of
high-rise flats have faced crippling costs owing to the cladding crisis, following
the Grenfell Tower tragedy.
A levy or tax on the
biggest property developers of high rises to pay for the removal of dangerous
cladding has been confirmed by the chancellor.
8. Money lessons
To help those of the
youngest age, there is extra funding for projects supporting new parents.
There is also a new
UK-wide programme to improve numeracy skills. The chancellor said that
individuals with poor numeracy faced up to £1,600 a year in lost earnings,
according to the charity National Numeracy.
The government will
spend billions on schools, police and the court service, whilst trying to
balance the books and reduce taxes before the next election.
A further £24bn will
be earmarked for "a multi-year housing settlement", £11.5bn of which
be set aside to build up to 180,000 new affordable homes, which he says is the
largest cash investment in a decade. Brown-field land will be targeted for new
homes, he says.
Rishi Sunak briefly
mentioned a visa scheme to attract the brightest and best to come to the UK to
work or start a business.
With inflation
rising and interest rates due to be increased, there has never been a more
important time to stay informed and never stop learning, especially if you want
to invest in property.
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