What you need to know about the Government’s spending and taxation plans.
This Autumn Budget, as announced in Parliament by Chancellor Rishi Sunak on 27 October 2021 didn’t have many surprises.
Most of the measures were leaked in the days ahead than in any previous year I’ve covered (even more than last March’s budget).
But there were still some extra details and a handful of fresh announcements, and I’ve compiled a list of the key ones below.
More detail may come in the next few days, and I’ll add information below as it’s revealed.
I’ll also be talking to the financial journalist Lily Canter on Thursday’s episode of my Cash Chats podcast to analyse everything. You can subscribe now on your favourite podcast app so you don’t miss it.
Watch my Q&A on YouTube talking about the Budget
Jobs & benefits
The headlines here are around wage increases for the lower paid and public sector workers – though in the context of high inflation and increased living costs, any extra cash is likely to be eaten by elsewhere.
Minimum wage to increase
From April the National Living Wage for those over 23 years old will increase from £8.91 an hour to £9.50 an hour. This 6.6% rise means someone on minimum wage who works 35 hours a week will see their pre-tax income jump up by £1,074.
This is before tax, the increase in National Insurance and any impact on the UC uplift cut.
And of course, many employers will choose to pass on some or all of this cost on to customers – which will also eat into the value of this increase.
There are also increases for younger workers. Those aged 21 or 22 will see the minimum wage increase from £8.36 to £9.18. It’ll increase from £6.56 to £6.83 for those between 18 and 20 years old, while under 18s will see a jump of 19p to £4.81 an hour. The Apprentice rate will go from £4.30 to £4.81 an hour.
It’s worth noting here that though the Government rebranded the minimum wage as the National Living Wage a few years ago, it’s different from the level recommended by the Living Wage Foundation. The figures for 2021 will be announced on 15 November and with the increased cost of living over the last 12 months it’ll remain higher than the increases listed above.
Universal Credit taper change
People claiming UC will be able to earn more from work before they begin to lose their benefits.
The current “taper rate” of 63p means that if you earn over a certain amount you’ll only keep the equivalent of 37p from every pound due in benefits – putting some off working more hours or going for better paid jobs.
The new rate will be 55p per £1, and this will be introduced within weeks and certainly before 1 December 2021.
There will also be an increase by £500 a year in the Work Allowance (how much you can earn before the taper is introduced) for those caring for children or a household member with limited capacity for work.
Public sector pay increases
Workers for the NHS, schools, police, civil service and other parts of the public sector will see a pay freeze ended. It’s not clear what the increase will be, and it’ll no doubt vary depending on each area. All the small print says is the increases “should retain broad parity with the private sector”.
Nothing on rumoured student loan changes
Nothing was said about the rumoured change to when people begin repaying student loans – though that could still come as a separate announcement.
Personal Tax & Savings
Alcohol tax revamped
There will be just six (rather than 15) different tariffs on booze. The stronger alcohol will be taxed more than before, while lower alcohol drinks will be taxed less. Four of these tiers (though not the rates) will be:
- 1.2-3.4% alcohol by volume (ABV),
- 3.5-8.4% ABV,
- 8.5-22% ABV,
- and above 22% ABV
As part of this, sparkling wines will no longer be taxed more than still wines, and fruit cider will be taxed at the same rate as apple and pear cider.
There will be a relief for smaller producers while pubs will also get a break with 5% relief on draught beer and cider – presumably these are the two other tariffs.
These new rules won’t come into effect until April 2023, but the broader increases set for alcohol this year will be cancelled.
Flight tax changes
There will be a 50% cut in Air Passenger Duty for domestic flights, but long-haul flights over 5,500 miles will be faced with a new tax that will be £91 for economy, and more for higher classes. That’ll include most of South America and Asia, and potentially the west coast USA.
I’ve had a quick look at distances using this site, and London to Los Angeles is under 5,500, but Edinburgh to LA is just over! While it’s the other way around for trips to Mexico City. I’d imagine the 5,500 distance will be evened out, rather than making it more expensive to fly from Scotland than England.
Fuel duty hike frozen
Fuel Duty won’t increase this year, though there are no cuts to changes to combat record petrol prices.
The big tax increases were announced last month – a hike of 1.25% on National Insurance and Dividends to start in April. Income Tax rates were also frozen last year and there were no changes announced.
VAT stays on energy bills
Some have been calling for a temporary suspension of 5% VAT on energy bills to help with the huge increases over recent months (which will likely continue). This was rejected by the Chancellor and stays in place.
Green Savings Bond
First announced back in March’s Budget, the Green Savings Bonds are now available to use for your savings – though they aren’t great. Here’s my analysis and list of alternatives.
I won’t go into all the business announcements as this is about personal finance, but there are a few significant ones.
50% discount on Small Business Rates
To help small retailers, hospitality and leisure businesses there will be a 50% cut in Business Rates for a year.
There will also be changes to broader Business Rates that’ll see them reviewed every three years, and a planned increase for next year will be cancelled.
No new online sales tax
It was thought there’d be some kind of announcement on an extra tax for online businesses, but this didn’t happen.
Property developer tax to fund cladding removal
The biggest property developers (worth more than £25million profit) will be taxed at 4% to build a £5billion pot to fund cladding removal on high risk buildings.
** UPDATE – turns out this is another measure that has already been announced!
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A regional transport package was announced worth £6.9bn, though only £1.5 billion is new money – the rest has been previously been revealed, including £4.2bn in 2019.
The money is to be spent on buses, trams and trains in England. Further money will go to Scotland, Wales and Northern Ireland.
Education and skills
School funding will return to 2010 levels, worth £1,500 extra per pupil.
There will be money spent to fund new T-Level qualifications for 16 to 19 years olds (announced back in 2020) and £560 million to train 500,000 adults with low numeracy skills via a scheme called Multiply.
A huge £5.9 billion will go to the NHS to largely fund equipment to help reduce the waiting lists for scans and tests that’s built up. This is in addition to the £12bn announced last month that’ll be paid for through the National Insurance increase.
Some major museums and galleries will get £850 million to redevelop or refurbish buildings. Another £75 million will go to regional museums and libraries to improve facilities.
£500 million fund for families
Local governments will be given funds to launch support centres for families, while money will also be allocated to areas such as mental health services and help with breastfeeding.
Overseas Aid funding returns
By 2024 the UK will once again provide 0.7% of GDP for overseas aid.