UK Budget 2021: Five Ways Rishi Sunak’s Plans Affect You and Your Money

• On Wednesday October 27, the Chancellor of the Exchequer Rishi Sunak, laid out the government’s tax and spending plans in the Autumn Budget, the second this year.
• The measures generally will have a significant impact on your finances.
• The Budget 2021 now places the tax burden at its highest levels since the early 1950s.

Yesterday  the Chancellor of the Exchequer Rishi Sunak, presented the UK Autumn Budget for the year 2021. Although many major announcements had been released in advance, the measures therein have significant implications on your personal finances.

Alongside the normal Budget, Mr. Sunak also outlined a three-year Spending Review, setting out the budgets for each department right up to Spring 2025.

Here we look at five ways in which the UK Autumn Budget 2021 will affect your money.

1. Universal credit taper cuts 

Are you working? Do you also receive universal credit?

If your answer is ‘Yes’ to both of the above questions, then you maybe affected by taper rates. This implies that as you earn more, the universal credit payment is reduced. Currently, for every pound you earn above the work allowance, 63p is automatically deducted from your benefit payment.

The Chancellor has reduced this 55p giving workers an opportunity keeping more of what they earn. This is also achieved with rise of the work allowance.

This university credit boost is only benefit around two million Britons with two million more seeing little or no benefits because they either do not work or earn below the work allowance.

2. Household Bills

The cost of living continues to rise as prices in he shops and household bills continue to go up. A global rise in gas prices has seen energy costs soar over the past year. As such, the cost of living is expected to rise by approximately 4% within the next 12 months according to official government forecasters.

It was expected that the Chancellor would slash the VAT on energy bills in attempt to help struggling families to keep energy costs down during winter.

Fuel duty has been frozen for more than a decade and Rishi Sunak plans to continue this for at least another year, even as driver continue to feel the pain at the pumps.

However, there were no clear measures to assist households with rising electricity and domestic gas bills.

According to the Mirror, Mr. Sunak kept away from announcing a cut in VAT on energy fearing that it would look bad ahead of the COP26 climate summit.

3. National Living Wage Rise

An increase in the minimum wage from April 2022 is was announced by the Chancellor on Wednesday October 27. The National Living Wage is currently £8.91 an hour for people aged 23 years and above, and the Mr. Sunak confirmed that it will increase to £9.50 from April 2022.

The chancellor is also announced a rise in minimum wage to £9.42 an hour for under 23s. There will also be increases in the minimum wage for younger workers.

If you are working 35 hours per week, the increase would mean that you earn an extra £928 a year before tax. If you also receive universal credit, you could be affected by the aforementioned taper rate.

National Minimum Wage Increases From April 2022

Age Group	Current Wage (£/hr)	New Wage (£/hr)
23 year and above	8.91	9.5
21-22-year-olds	8.36	9.18
18-20-year-olds	6.56	6.83
Under 18s	4.62	4.81
Apprentices	4.3	4.81

 

The Chancellor also had a good plans for workers in the public sector who are sent to receive a pay rise in April 2022 after the freeze on wages put in place at the height of the Covid-19 pandemic is lifted. However, it is not known how much increase this is and whether is will be more than the rising cost of living.

4. Alcohol Duty Overhaul

Mr. Sunak also announced major changes to the way that alcohol is taxed in the UK in what he described as “the most radical simplification of alcohol duties for 140 years”, coming into effect in February 2023.

The number of main duty rates was reduced from 15 to six. The stronger the drink the higher the rate. Therefore, higher-strength drinks will go up in price,  ending the era of cheap high strength drinks. However, the Chancellor imposed lower duty on drinks ranging from sparkling wine to draught beer.

Many lower alcohol drinks are currently overtaxed, such as fruit ciders and liqueurs. They will now pay less taxes. This is aimed at encouraging craft producers which include small cider makers and those making drinks of less than 8.5% alcohol.

Sparkling wines will have the same duty as still wines of equivalent strength with English and Welsh wines will paying less.

Consumption in on trade (pubs) fell 40% even before pandemic. The Chancellor has announced a draft relief resulting in new lower duty on draft beer and cider. He cut the duty on draft beer by 5%, the biggest cut to beer duty in 50 years.

Note that, contrary to what often happens on Budget day, the alcohol duties will not increase immediately.

5. Personal Taxes

Chancellor Rishi Sunak said that his plan was to reduce taxed during the rest of this August House’s term. “I want taxes to be going down not up… That is mine mission”, he said.

Although announced before this Autumn Budget 2021, two massive tax decisions had already been made that will significantly affect your finances in the coming years.

The first one was made in the Spring Budget where the Chancellor indicated that the thresholds at which income tax is paid would be frozen at April 2021 levels for the next five years (with different levels for Scottish citizens). This implies that if you receive a pay rise, you are likely to be pushed into a higher tax band.

The second came in September when the Prime Minister Boris Johnston announced that employees, employers and the self-employed would all pay 1.25p more on the pound for National Insurance (NI) from April 2022 to fund social care.

The Universal credit taper appears to withdraw support for working harder with This is because, for every £1 you earn, your payment is reduced by 63p, as earlier explained. This is what many have termed as “This is a tax on work.”

Mr. Sunak cuts this by 8% in the Autumn Budget 2021– from 63% to 55%.

Others

Other announcements from the Chancellor’s plans that are likely to directly or indirectly affect your personal finances are cuts on air passenger duty of short haul flights (but long overhaul flights could get more expensive); extra funding for projects supporting new parents and programmes to improve numeracy skills; and the cancellation of the planned rise in fuel duty.

Nevertheless, the tax burden is now at its highest levels since the early 1950s.