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Budget 2021: How It Affects You

Calculating budget

The budget announcement might not be everybody’s idea of five-star entertainment, but it is an important occasion that will affect your personal finances as well as the financial health of the nation. We’ve combed through chancellor Rishi Sunak’s announcement and pulled out some of the key changes that could impact you.

Universal credit top up to continue

There has been a lot of speculation about how long the £20 universal credit top up would continue for. We’re pleased to see confirmation that it won’t be stopping just yet, however the chancellor did confirm that it will only be paid for another six months. This means that those receiving universal credit benefits can expect to see their payments go down by £20 each week after six months have passed.

For people on working tax credits, there will be a one-off payment of £500. These so called ‘top up’ payments are designed to help families cope with some of the financial challenges caused by Covid-19.

Making it easier to buy a house

First time buyers with limited savings have struggled this year after banks started pulling the plug on mortgages for those with a 5% deposit. Today’s budget included a ‘government guarantee’ that will be used to protect banks that choose to offer this type of mortgage – which should give buyers more options. We’ve also heard that the stamp duty holiday will be extended until 30 June, with no stamp duty paid on the first £500,000 of a property’s price.

More support for furloughed workers

Those who are taking advantage of the government’s furlough scheme will be happy to hear that this is now being extended until September. The hope is that, as more people receive the Covid-19 vaccine and lockdown measures begin to ease, businesses will soon be able to reopen their doors and bring furloughed employees back into the workplace. Until then, the government will continue paying 80% of wages to help tide people over.

Two new grants for the self employed

Self employed workers are able to receive government support through the Coronavirus Self Employed Income Support Scheme (SEISS). The scheme has been quite controversial due to strict eligibility criteria that lock many people out from receiving the grant – about three million people are estimated to be excluded. However, the good news is that for those who do qualify there will now be two more opportunities to apply for grants to cover any lost income.

Freeze on income tax thresholds means that many could end up paying more

Income tax will not be rising, however Sunak has announced that he is freezing the income tax threshold for the next five years. This means that those earning £12,570 or above will pay at the 20% tax rate, while those earning £50,270 will pay the higher 40% rate. Typically, these thresholds go up slightly each year, meaning that people can earn more before they have to start paying. Now that they have been frozen, it’s likely that those receiving a pay rise may find themselves moving up into a higher tax bracket and therefore paying more.

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