Budget 2021

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Budget 2021

What does it mean for you?

From extending support for workers affected by coronavirus (COVID-19) to helping home-buyers and freezing income tax thresholds, the government has unveiled a series of changes that could affect your finances.

  • Your income

    Protecting jobs

    If, like many people right now, your income is being affected by coronavirus, there were measures unveiled in this year’s Budget that could offer some reassurance in the coming months.

    With economic conditions still uncertain, the Chancellor announced an extension of the furlough scheme for a further six months.

    This means that if you're already on furlough, and were concerned about the scheme coming to an end in April, you now have some assurance that the scheme is available to employees until at least September. 

    If you're in employment, but concerned that your job could be at risk, the extension of the scheme could now open up furlough, rather than redundancy, as an additional option for your employer.

    Under the extended scheme, you would continue to receive 80% of your salary for the hours you can’t work, up to £2,500 a month. The only change is that, from July, this won't be paid entirely by the government. Instead, employers will be expected to contribute a proportion of these wages, starting at 10% and rising to 20% from August.

    If you're self-employed and your turnover has been affected by the pandemic, the Budget also contained fresh support that you may be eligible for.

    You may be able to take advantage of the Self-Employed Income Support Scheme (SEISS), which has also been extended until September and could help if your income is reduced in the months it covers. This option could now be available to you even if you only started working for yourself in the 2019-20 financial year. 

    If you can show your turnover has suffered as a result of the coronavirus pandemic, you may be able to claim up to 80% of three months’ average profits for the February to April period, capped at £7,500 in total.

    However, the scheme has been updated slightly and self-employed people whose businesses have performed relatively well will receive less help for the May to September period. If your turnover has fallen by 30% or more, you could continue to claim a grant worth 80% of three months’ average profit. If your total turnover has fallen by less than 30%, you could claim the equivalent of 30% of three months’ average profit, capped at £2,850. 

    To help lower earners, the Chancellor also announced a 2.2% rise in the National Living Wage (NLW) from £8.72 to £8.91. This is the equivalent of a £350 pay rise for you if you are working full time on the NLW.

    If you're out of work right now, then there could be some help on the horizon following the announcement of a new apprenticeship drive. The government hopes to create 40,000 new apprenticeships by paying £3,000 grants to employers in England for each apprentice they take on.

    In addition, if you are claiming Universal Credit, you will be able to continue claiming a £20 per week ‘top up’ for the next six months. If you claim Working Tax Credits you will receive the same amount but in the form of a one-off payment of £500.

    However, keep in mind that this top-up will end in September, so it might be worth thinking ahead with your finances as much as possible. 

    If you or your family are affected by Covid-19 and you need to bank from home, you can access your accounts, manage payments, check your statements and much more, 24 hours a day through online banking and the Barclays app.

    Find out more about how to download the Barclays app1.

  • Your home

    Help with housing

    If you're aspiring to buy or sell a home, there were two announcements that could significantly boost your options. 

    First of all, the Chancellor extended the stamp duty holiday to allow buyers an additional three months (until 30 June 2021) to purchase a property in England or Northern Ireland without having to pay stamp duty on the first £500,000 of the price. This will be a big relief to many buyers who had been anxiously racing to complete their transactions before the holiday ended.

    It may also help your money go further if you're thinking about moving home. If you were to buy a £500,000 property in England or Northern Ireland, you could still save up to £15,000 on stamp duty if you complete before 30 June.

    Even if you miss this new deadline, you can still save money. That’s because the government has also introduced a tapering period that means that after 30 June, the nil-rate band will be reduced to £250,000 until the end of September before it returns to the pre-coronavirus level of £125,000. 

    If you want to buy a home, but are finding it difficult to save for a deposit, then there was also good news: the government announced the launch of a new mortgage guarantee scheme. This scheme, which allows you to buy a property with a deposit as low as 5% of the property’s value, means buying a first home or moving to somewhere bigger could now be within reach – and so it might be a good time to consider saving for a deposit.

    The scheme is open to any buyer (not just first-time buyers) and applies to any property up to the value of £600,000 from April 2021. Based on the UK average house price of around £250,0002, this could allow you to buy a home with a deposit of £12,500.

    We'll be offering these 95% mortgages with a government guarantee, subject to an affordability assessment. Be aware though, with a 95% mortgage house price falls could risk putting you into negative equity, which could be a complication if you needed to sell your property.

    Saving to buy your first home? Find out more about ways to get on the ladder in our first-time buyers’ guides.

  • Your cost of living

    Tax and the cost of living

    If you were worrying about the possibility of tax rises, there will be some relief that the Chancellor held back from announcing any major hikes for now.

    However, although the Chancellor did not increase income tax, National Insurance contributions or VAT as some had expected, he did freeze the thresholds at which employees start paying 20% income tax and at which they pay the higher rate of 40%.

    As a result, if you receive a pay rise before 2026, you could find yourself pushed into a new tax threshold – and paying more tax. These thresholds will rise to £12,570 for the 20% band and £50,270 for the 40% band in April as planned, but will then remain at that level for five years, even if inflation helps to boost wages.

    The Office for Budget Responsibility estimates that the freeze will result in an additional 1.3 million people beginning to pay the lowest rate of tax (20%), while another million will move into the higher rate.

    If you have a savings plan, you may also want to adjust it to factor in newly announced freezes on inheritance tax thresholds, the pensions lifetime allowance and annual capital gains tax exemptions. These have all been frozen until 2026.

    This means that if you inherit money or benefit from profits from your investments, the amount of money you can receive before you start paying tax will stay the same for five years, irrespective of inflation. Likewise, the amount of money you can build up in your pension pot before attracting a tax charge will remain unchanged until 2026.

    On the other side of the coin, the price of some goods will not be impacted by a tax rise as had been expected prior to the Budget announcement. Fuel duty will be frozen for the eleventh year in a row, meaning you will pay 57.95p in duty per litre plus VAT when you fill up your car.

    And for the second year in succession, alcohol duties will also be frozen, meaning you will not pay more in taxes for your pint once the pubs finally open again.

    Anyone trying to balance the books at home can read our guide to cutting household bills and reducing the cost of childcare.

Barclays does not provide financial, legal or tax advice. Accordingly, nothing contained within this article should be construed as constituting legal, financial or tax advice. Tax rules and legislation can change and the benefits and drawbacks of a particular tax treatment will vary with individual circumstances. We recommend that you take professional advice where required. You have sole responsibility for the management of your respective tax, financial and legal affairs, including making any applicable filings and payments and complying with any applicable laws and regulations.

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