THE Budget is just weeks away, and with it could come tax rises and a boost to Universal Credit. We take you through everything you need to know about
THE Budget is just weeks away, and with it could come tax rises and a boost to Universal Credit.
We take you through everything you need to know about the upcoming statement, which will affect the cash in your wallet.
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What is the Budget?
It’s different to the Spending Review, which sets out how much public cash will go towards funding certain departments, devolved government’s and services, such as the NHS.
The Budget is read out in the House of Commons by the Chancellor of the Exchequer. It will be Rishi Sunak‘s second Budget as Chancellor.
Mr Sunak’s first Budget in March last year was dubbed the “coronavirus Budget” after it focused on supporting Brits financially through the crisis, rather than the government’s “levelling up” agenda as promised in the 2019 general election.
When is the Budget?
The Budget will be held on Wednesday March 3, 2021. The government confirmed the date in December 2020.
The time is yet to be announced but it’s usually delivered in the morning after Prime Minister’s Questions.
Instead, Mr Sunak updated MPs on plans “to continue protecting jobs”, including furlough extensions and support for businesses to get them through the Covid crisis.
What can we expect from the Budget 2021?
The Budget is likely to focus on the economic fallout from the coronavirus crisis.
The government has borrowed a record £284.7billion from April to November to help fund schemes such as furlough and the bounce back loans for businesses.
Here are some of the things we can expect, although bear in mind things can change quickly as the pandemic unfolds.
Universal Credit boost
Last year, the Chancellor announced a £20 a week boost to Universal Credit to help low-income families through the pandemic and lockdown restrictions.
But the hike, worth £1,040 a year, was only a temporary measure set to last a year.
What to do if you have problems claiming Universal Credit
IF you’re experiencing trouble applying for your Universal Credit, or the payments just don’t cover costs, here are your options:
- Apply for an advance – Claimants are able to get some cash within five days rather than waiting weeks for their first payment. But it’s a loan which means the repayments will be automatically deducted from your future Universal Credit payout.
- Alternative Payment Arrangements – If you’re falling behind on rent, you or your landlord may be able to apply for an APA which will get your payment sent directly to your landlord. You might also be able to change your payments to get them more frequently, or you can split the payments if you’re part of a couple.
- Budgeting Advance – You may be able to get help from the Government for emergency household costs of up to £348 if you’re single, £464 if you’re part of a couple or £812 if you have children. These are only in cases like your cooker breaking down or for help getting a job. You’ll have to repay the advance through your regular Universal Credit payments. You’ll still have to repay the loan, even if you stop claiming for Universal Credit.
- Cut your Council Tax – You might be able to get a discount on your Council Tax by applying for a Council Tax Reduction. Alternatively, you might be entitled to Discretionary Housing Payments to help cover your rent.
- Foodbanks – If you’re really hard up and struggling to buy food and toiletries, you can find your local foodbank who will provide you with help for free. You can find your nearest one on the Trussell Trust website.
There has been much speculation over whether the policy will be extended beyond March.
A source told The Sun back in October that Mr Sunak was “open to the idea”, but that was before England was plunged into the latest lockdown.
Instead, the Chancellor is now reportedly offering to give Universal Credit claimants a one-off payment of £1,000.
He is said to be reluctant to continue the weekly boost, fearing that it would then become a permanent increase costing £6 billion a year.
However, the one-off £1,000 payment has been rejected by work and pensions secretary Thérèse Coffey.
One way the Chancellor may be looking to raise funds to repay the UK’s record borrowing is by raising taxes.
There has been speculation National Insurance and fuel duty could see rates rise, while pension tax relief could be cut.
There is also talk of changes to capital gains tax but nothing has been announced.
Some experts have warned that raising taxes now, when households are still coping with the impact of crisis on their finances, could be even more damaging.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said it’s still very early “to consider clawing back cash” but admits some hikes could be announced in March.
She added: “Taxes don’t have to be hiked in order to extract more cash from us: inflation will do that all by itself.
“Consumer Price Inflation is likely to rise slower than wage inflation, which means income tax and NI will rise.
“Meanwhile, a combination of price inflation and the possibility we’ll spend more as the economy recovers, means we’ll spend more in VAT.”
Another option for Mr Sunak is freezing income tax rates.
The tax-free personal allowance and income tax bands usually rise each year to keep up with the rising costs of goods.
At the moment, the amount someone can earn before paying income tax is £12,500.
This personal allowance is due to rise with inflation each year and reach around £13,250 by the 2024 election.
The £50,000 threshold, above which people pay 40 per cent income tax, is due to rise to around £53,000 by the end of this Parliament.
However, according to new reports which haven’t been confirmed by The Treasury, these planned increases would be axed and the thresholds frozen.
But freezing the thresholds as they are would mean the average working family missing out on £250-a-year by 2024-2025.
Cigarette prices to increase?
It’s also common for the Budget to hike up the tobacco tax, pushing up the price of cigarettes.
Final rates are confirmed on Budget Day and usually apply from that evening.
In last year’s Budget, Mr Sunak hiked the tobacco tax by an extra 2% above the inflation rate of 1.8%, adding 27p to a pack of cigarettes.
Furlough scheme extended again?
The government’s Coronavirus Jobs Retention Scheme (CJRS), or furlough, could be extended again while some businesses are forced to remain shut.
The government will cover 80% – up to £2,500 – of an employee’s wages if they have been furloughed.
It has been extended three times already. Firstly, it was pushed back from its initial deadline of May 31 to October 31.
The scheme was then extended to last until March 31, 2021 following the second national lockdown in England.
And Mr Sunak then extended it until the end of April in December.
Current lockdown restrictions aren’t expected to be eased until at least March this year, with England returning to the Tier system.
Some jobs will continue to be affected by the lockdown measures and Mr Sunak could choose to extend the scheme to support them.
More support for the self-employed
Martin Lewis revealed in January that the Budget is likely to include news on the fourth self-employed grant, despite it taking place a month after the grant period begins.
The self-employment income support scheme (SEISS) gives grants to help those who work for themselves if their income has been negatively impacted by Covid.
The money guru said the amount people can get and who is eligible will be announced on March 3, even though the period is set to cover the months February, March and April.
With previous grants, the details of the scheme have been made available before the grant period starts.
Martin Lewis called the decision “unnecessarily cruel” for making people in “dire” financial need wait to see if they can claim the much-needed money.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
Up until July 8, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
This was temporarily increased to £500,000 until March 31, 2021 in the government’s mini-Budget in July 2020.
The rate a buyer has to fork out varies depending on the price and type of property.
Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you’re a first-time buyer.
The usual system in England for residential properties means:
- First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
- You pay nothing if the property costs below £125,000
- You pay 2% if it is worth between £125,001 and £250,000
- You pay 5% if between £250,001 and up to £925,000
- You pay 10% if it is between £925,001 and £1.5million
- You pay 12% on anything over £1.5million
For second homes or buy to let properties:
- 3% on purchases up to 125,000
- 5% on purchases between £125,001 and £250,000
- 8% on purchases above £250,001 and £925,000
- 13% on purchases above £925,001 and £1.5 million
- 15% on purchases above £1.5 million
Stamp duty extension
There have been many calls from the housing sector for the Chancellor to extend a stamp duty holiday, due to end March 31.
The tax break, which sees land duty scrapped on the first £500,000, was introduced in July’s mini-budget.
It has been credited for the mini-boom that saw house prices rise by 6% in the second half of the year.
In January, The Sun reported how Mr Sunak has privately ruled out an extension to the nine-month tax holiday but since then there have been further reports saying he is still “considering” it.
Parliament debated the issue last week after more than 110,000 people signed a petition calling for its continuation.
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End of stamp duty holiday could trigger drop in house prices
Stamp duty is an unpopular tax and there have been calls to change the way it works in recent years.
But David Hannah, from Cornerstone Tax, said: “Calls to make the holiday permanent or scrap the tax altogether seem unrealistic given the levels of public debt and the £12billion tax take it generates each year.
“But having such a strict cut-off point, particularly in such a turbulent and difficult housing market and economic climate could result in a a catastrophic drop in demand and prices.”