Autumn Budget 2021: at a glance

We take a look at the impact the Budget will have on your household finances

Budget 2021
(Image credit: Getty)

The chancellor Rishi Sunak delivered his second Budget for 2021 with a series of announcements that will impact your personal finances. 

Here’s everything you need to know.

 Autumn Budget 2021: at a glance - inflation will hit 4% 

Inflation, the cost of goods and services,  will continue to dent household finances with the chancellor expecting it to average 4% next year - well above the 2% year target.

The government had previously said the high inflation environment was temporary, but this does not appear to be the case.

So, although we will not see further tax rises, high inflation will reduce the spending power of your money. 

“It will be a relief to many that no further tax increases were announced for individuals, however, people should take this as an opportunity to review their financial plans and ensure they are making full use of all available tax allowances in order to protect their wealth as much as possible,” Anthony Ward, head of wealth planning at Barclays Wealth, said.

Universal credit taper cut 

The universal credit (UC) taper rate will be cut from 63% to 55% no later than 1 December, meaning UC claimants will be able to keep an extra 8p for every £1 of net income they earn.

This is good news for low paid workers who recently lost the £20 uplift to universal credit this month.

“The worry is whether this will be enough to keep claimants financially afloat amid the uptick in the cost of living, with inflation forecast to peak at 4% before year end, as well as rising energy bills. However, a pledge to cut the taper rate from 63% to 55% by December could help support people through the brunt of the financial pinch this winter,” Myron JObson, personal finance campaigner at interactive investor says.

National Living Wage Increase  

The National Living Wage will rise from £8.91 to £9.50 an hour in April 2022. National Minimum Wage for people aged 21-22 will increase from £8.36 to £9.18 an hour, while the Apprentice Rate will rise from £4.30 to £4.81 an hour.  

Public sector pay-freeze 

Public sector pay-freeze to end, with 5 million workers receiving a pay rise next year. The exact amount will depend on the recommendations from the independent Pay Review Bodies.  

Capital gain tax and selling a property 

From midnight, 27 October, 2021, the deadline to report and pay capital gains tax after selling a UK residential property will increase from 30 days after the completion date to 60 days. 

Start for Life Fund 

Experts say the first 1,001 days of a child’s life are the most important, and to help families the government has responded with £300 million funding for Start for Life offer for families. This will include a high quality parenting programme and tailored services such as perinatal mental health. 

Help with childcare costs 

Childcare providers will get an increase to their hourly rate to help deliver the government’s free childcare hours. £170million will be invested in 2024/25. A further £150m will be invested to support training and development for the entire early years workforce.

In addition, £200m a year will be made available a year to continue the holiday activity and food programme.

Multiply - a new maths coaching programme 

Around eight million adults in England have numeracy skills lower than those expected of a nine year old. 

A £560 million math coaching programme - Multiply -  will help 500,000 improve their numeracy skills. It is expected to launch in Spring 2022.

ISA Allowance 

The ISA allowance will remain at £20,000 for the tax year 2022/23. This means you can save up to £20,000 and not pay any tax on your returns.

The child trust fund and junior ISA allowances will also be frozen at £9,000 for 2022/23.

Overhaul of alcohol taxes 

prosecco becomes cheaper

Prosecco will become cheaper

(Image credit: Getty)

It’ll be cheers all round for boozers as a shake-up in alcohol taxes will see the price of a pint of draught beer cut by three pence and a pint of draught fruit cider by two pence. The new Draught Relief policy will see the complicated system of 15 different alcohol duties reduced to just six with the principle that “he stronger the drink the higher the rate of tax”. 

It means drinks like Rose wine, liqueurs, Prosecco, English and Welsh sparkling wines and draught beer and cider will become cheaper while red wine, fortified wines or high strength cider will become more expensive. A 75cl bottle of wine will be cut by 14 pence, for example.

The changes will come into effect from midnight. The Chancellor described the change as ‘the right thing to do’: “This will help end an era of cheap high strength drinks which can harm public health and enable problem drinking.”

Fuel duty freeze 

Motorists will be happy to learn that the planned fuel duty rise has been cancelled. The Chancellor has decided to freeze fuel duty for the 12th year in a row, keeping it at 57.95p a litre for petrol and diesel. 

This means the expected hike to 60.70p which would have potentially cost drivers an extra £66 a year has been squashed.

Sunak said in the House of Commons: “With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses.”

Air passenger duty 

It’s bad luck if you have family you want to visit in Australia after Rishi Sunak said taxes will be raised on long-haul flights from April 2023. Air passenger duty has been increased for flights over 5,500 miles in the spirit of making the ‘polluter pay’. This includes journeys to countries such as Australia, South Africa and Japan.

Internal flights within the UK, however, will be cheaper. Flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower air passenger duty.

Rishi Sunak explained the reasoning behind the decision: “Most emissions come from international rather than domestic aviation. Less than 5% of passengers will pay more, but those who fly the furthest will pay the most.”

Tobacco duty 

Smokers who have previously thought about quitting may want to reconsider as they will pay up to 88 pence more for a 20-pack of cigarettes from 6pm today thanks to a hike in tobacco tax. 

Cheaper packets will rise by 63p from £9.10 to £9.73 while rolling tobacco will also be affected: a 30g bag will increase by 89 pence from £8.14 to £9.02.

Kalpana Fitzpatrick
Digital Editor, MoneyWeek

Kalpana is the Digital Editor of sister site MoneyWeek.

She’s an award-winning journalist and author of Invest Now: The Simple Guide to Boosting Your Finances  and a children's book Get to Know Money  - with extensive experience in financial journalism. Her work includes writing for a number of media outlets,  including national papers and well-known women’s lifestyle and luxury titles, where she was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio; appearances include BBC One’s Morning Live,  ITV’s Eat Well, Save Well, Sky News and Channel 5's 30 money saving tips series.

She was also the resident money expert for the BBC Money 101 podcast.

A well-known money and consumer journalist, Kalpana also often speaks at events.

She is passionate about helping people be better with their money, save more and be smarter spenders.

Follow her on Twitter and Instagram @KalpanaFitz.