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Dean Dunham: The effect of the 2021 Budget on consumers
3 March 2021, 16:20 | Updated: 4 March 2021, 12:53
The Chancellor has announced the Budget today and overall, its good news for consumers. Here is what you need to know:
1. EMPLOYEES AND SELF-EMPLOYED
Furlough scheme extended
The furlough support scheme was due to end in April but will now be extended until the end of September. The key points to be aware of are as follows:
· How much will employees on furlough receive?
Employees on furlough will continue to receive 80% of their salary for hours not worked. However, the figure is capped at £2,500 per month, so if 80% of your salary is greater than this amount you will only receive £2,500. This is no different to the current position with Furlough.
· Will part-time furlough still be allowed?
The position will be the same as it currently is, so yes part-time furlough is allowed. So, your employer will be able to move you to part time hours and claim furlough for the hours you do not work.
· Are there any changes?
Yes, but these only affect your employer. The major change is that from July 2021 your employer will only be able to recover 70% of your salary from the state and will have to fund the remaining 10% itself – so employees will still receive the full 80%. This will then be reduced again in August and September, when the state will pay 60% and employers will have to pay 20%.
Self-employed income support scheme
The Government also announced a major extension to the Self-Employment Income Support Scheme (SEISS) – and crucially, for the first time since the scheme launched its scope will now be widened to include some of those who were not previously eligible. Under the new rules, the self-employed will be eligible so long as they have filed a tax return by midnight last night. This is a big improvement as when SEISS was launched, the newly self-employed could not qualify because they had not all filed a 2019-20 tax return.
The SEISS will continue until September with a fourth grant covering the period February to April, and a fifth and final grant from May onwards.
The fourth grant will provide three months of support at 80% of average trading profits. For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.
Personal tax allowance
The personal tax allowance is being frozen.
The personal tax allowance is how much you can earn each year before paying income tax, and has increased substantially in recent years. The government had previously committed to increasing the allowance by the rate of inflation each year. However, on this occasion Government has announced that the personal tax allowance is to be frozen.
The allowance will increase to £12,570 from its current level of £12,500 in April. But it will then not be increased again before April 2026.
Government announced a freeze in the threshold at which people start paying the higher rate of income tax.
The threshold is increasing to £50,270 in April from its current level of £50,000. However, this threshold will then be frozen until 2026.
Government also announced a freeze on national insurance.
National living wage
The National living wage, which is currently £8.72 for anyone over the age of 24, is increasing to £8.91 per hour, from April 2021.
Government has announced it will pay businesses a £3000 incentive payment for apprenticeships. This will inevitably encourage businesses to take on more apprentices.
Universal credit uplift extension
Government increased the universal credit standard allowance by £20 a week last year on a temporary basis.
This temporary increase was due to end on 6 April, but the chancellor has today announced that this is to be extended for a further six months.
In addition, working tax credit claimants will get equivalent support for a further six months. Due to the nature of working tax credit these claimants will not receive a weekly payment but will instead receive a one-off payment of £500.
3. HOME BUYERS
Stamp duty holiday extended
In July 2020 Government raised the stamp duty (SDLT) threshold from £125,000 to £500,000, meaning home buyers would pay no stamp duty on house purchases up to this amount. This
temporary change was due to end in March this year, but Government has today announced that it will continue.
The £500,000 nil rate band will now end on the 30th of June. Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from 1st October.
Mortgage guarantee scheme launched
The government mortgage guarantee scheme will offer 95% mortgages for houses worth up to £600,000. The key points to be aware of are:
· Is this for first time buyers only?
More details are to follow but it appears that this scheme will not be exclusively for first time buyers.
· What does it mean in terms of the deposit?
Buyers who are eligible will be able to pay a 5% deposit, as opposed to the standard 10%.
· Which lenders will be offering the 95 per cent mortgages?
In his budget speech, the Chancellor said that “several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month.”
He also said that “more, including Virgin Money will follow shortly after.”
· When does the scheme launch?
It will launch next month and will be available for new mortgages up to 31st December 2022.
4. OTHER TAXES AND DUTIES
Fuel duties have been frozen for another year.
Fuel duties have been frozen for another year.
The thresholds at which estates start to pay inheritance tax have been frozen until April 2026.
The threshold currently stands at £325,000 for individuals, doubling to £650,000 for couples.
Capital Gains Tax
There had been much talk in advance of the speech about the potential for wholescale changes to the way Capital Gains Tax works.
However, there was no mention of capital gains tax in the budget so there is no change.
5. RETAIL AND HOSPITALITY
Contactless card payments
The limit for contactless card payments rose from £30 to £45 at the start of the coronavirus pandemic in April 2020.
Government has now increased the limit from £45 to £100, although it may take some time for this to be implemented.
VAT cut in hospitality to be extended
Government has announced that the 5% reduced rate of VAT for companies in the hospitality and tourism sector will continue to the end of September.
There will then be an interim rate of 12.5% for the six months after that. The affect is to reduce costs for consumers