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MoneySavingExpert's Martin Lewis gives his instant take on the Budget 2021
3 March 2021, 14:54 | Updated: 3 March 2021, 21:00
Martin Lewis, the founder of MoneySavingExpert, gives his instant take on the Chancellor's 2021 Budget.
Chancellor Rishi Sunak has announced his Spring Budget, ranging from extending the furlough scheme to increasing corporation tax.
He introduced a raft of measures to help people and businesses as the Covid pandemic continues to affect the UK economy.
The Chancellor said coronavirus has caused one of the "largest, most comprehensive and sustained economic shocks this country has ever faced".
Martin Lewis told LBC that "fiscal drag" is the Chancellor's main way of recouping funds in this Budget: "Fiscal drag is where you freeze thresholds so thresholds will go up as planned this year then from next year to 2026, your tax-free allowance, the amount you start paying higher rate tax, capitals gains tax, inheritance tax, lifetime allowances, will all be frozen."
He explained that this will mean that as inflation occurs and wages grow, "more people will pay more tax."
Mr Lewis noted the Chancellor did not cover what will happen to self-employed people on Universal Credit: "There's this rather complicated thing called the minimum income floor and that has been removed at the moment."
He explained that the minimum income floor means, effectively ,that "regardless of what they're actually earning, they'll be assumed to be earning minimum wage at roughly 35 hours a week and their Universal Credit will be counted on that."
"When you get rid of it, there's no assumption of minimum earnings...that has been kept until August."
He explained that from July employers will have to pay 10% towards salary and from August 20%.
For businesses, once they are paying 10-20% of a furloughed person's salary, it's a "crystallisation point to the mind that says I'm only keeping people on who I will definitely need."
Read more: Budget 2021: Key points at a glance
Here are some aspects of the Chancellor's Budget mentioned by Martin Lewis:
- The furlough scheme will be extended to the end of September, as will support for the self-employed.
- The Universal Credit uplift of £20 a week will continue for a further six months, well beyond the end of this national lockdown.
- The Chancellor confirmed an additional £1.6 billion for the coronavirus vaccine rollout and to "improve future preparedness".
- A new restart grant will start in April to help businesses reopen, with £5 billion of funding.
- The Government will not raise the rates of income tax, national insurance, or VAT, instead freezing personal tax thresholds.
- Inheritance tax thresholds, the pensions lifetime allowance, and the annual exempt amount in capital gains tax will be maintained at current levels until April 2026.
- The Chancellor said: "We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026. The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period."