The 2021 budget was certainly focused on the post-covid era and as Mr Sunak said would pave the way for an ‘economy of higher wages, higher skills and rising productivity’.
Rishi Sunak’s speech also included his two key fiscal rules;
- That borrowing should fall as a percentage of the economy,
- The government would only borrow cash to invest in projects that will help the economy grow.
The key takeaways from the 2021 budget are:
National Insurance Increase
From April 2022, an extra 1.5% of tax taken from salary through both class 1 National Insurance Contributions paid by employees and class 4 NICs paid by self-employed workers (this is expected to add £180 a year to the average standard rate taxpayer’s annual bills and £715 a year to the average higher rate taxpayer’s bills). The levy will not apply to pensions income or voluntarypayments.
Dividend Tax Increase
Dividend taxes will also rise by 1.25%, this is a tax charged on income received from shares you own. The Chancellor went on to detail that he planned to reduce taxes in the next few years.
“We’re making sweeping reforms to our out- dated alcohol duty system. Introducing a new system that is simpler, fairer, and healthier – as well as permanently cutting the cost of a pint by 3p,” Rishi said.
“The planned increase in duty on spirits like Scotch Whisky, wine, cider and beer, will all, from midnight tonight (27thOctober), be cancelled,”.
From 15 rates of alcohol duty, there will just be six categories in a system based on the idea “the more alcohol, the higher the tax”. Therefore, strong ciders and fortified wines will cost more.
Additionally, there will be price falls for champagne, sparking wines, fruit ciders, and lower strength beers and wines.
There will also be a 5% price cut in taxes on pints pulled in pubs.
Minimum Wage Rises
From April 1 next year, with the National Living Wage (NLW) increases from £8.91 to £9.50 an hour. This will add £1,073.80 to the annual earnings to a person working 35 hours a week. The minimum wage for people aged 21-22 willincrease from £8.36 to £9.18 an hour. The Apprentice Rate rises from £4.30 to £4.81 an hour.
Universal Credit Relief
The Chancellor said the universal credit taper rate – which sees benefits fall for every extra pound you earn – will be reduced.
People currently claiming universal credit lose 63p worth of benefits for every £1. That will be cut to 55p “within weeks” – and increasing work allowances by £500 a year to seeing people who are working while still claiming benefits keep more of their cash.
“I’m also increasing the Work Allowances by £500, this is a tax cut next year of £2.2bn.”
“Nearly 2 million families will keep, on average, an extra £1,000 a year. To be introduced no later than December 1st.“
Public Sector Pay Rises
After a one year pay pause, the Chancellor said more than 5 million public sector workers would see their pay rise again next year. This includes nurses, teachers and members of the armed forces.
More Support For Parents
The Budget includes a £500 million plan to support parents and children in England. That is made up of £200 million to support families with complex issues; £82 million for parenting advice centres in 75 different are- as; £100 million for mental health support for expectant parents; and £50 million of breast- feeding support.
Flight Taxes Down For Domestic Flights
Air passenger duty will be halved on domestic flights. But it will be increased on flights over 5,000 miles.
Tax Cut For Retail And Leisure Firms
The chancellor has slashed business rates by 50% (up to £110,000) – for businesses in retail and leisure for one year.