Universal Credit boost and tax hikes among 12 key financial changes in 2021 you need to look out for

TOMORROW is the start of a New Year, so we’ve taken a look at what changes are coming in 2021 that will affect the cash in your wallet.

The coronavirus pandemic has wreaked havoc on personal finances, so it is more important than ever to prepare for what’s to come.

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Here's 12 key changes you should look out for in 2021 — Here’s 12 key changes you should look out for in 2021

The New Year will see a range of changes from rail fares hikes to bigger tax bills.

But it’s not all bad news as the government has also promised to pump £7billion into the welfare system, meaning some benefits could increase.

Here’s everything you need to look out for going into 2021:

1. Boost to Universal Credit

This year, households on Universal Credit saw payments temporarily boosted by £1,040 (£20 a week) due to the coronavirus crisis until April 2021 – but it’s unclear if this will continue.

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 or be entitled to Discretionary Housing Payments if your existing ones aren’t enough to 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.

More than 50 charities and groups have since urged Chancellor Rishi Sunak to extend the support, and a decision is expected next year.

The support means that for a single claimant, who’s 25 or older, the standard allowance rose from £317.82 to £409.89 per month in April 2020.

The standard allowance is the amount that everyone is entitled to if they’re accepted on Universal Credit.

If the support isn’t extended after April 2021, Universal Credit claimants will see their payments fall.

In April, some Universal Credit payments will rise depending on individual circumstances like age, whether you have any disability and if you have children or are a carer.

For example, the standard allowance for single people aged under 25 will rise from £256.05 to £57.33, and from £323.22 to £324.84 for those who are older.

The child element is also rising slightly at the start of the new tax year.

The amount for a first child will rise to £282.50, up from £281.25.

Here’s the full list of Universal Credit benefits that will be rising and by how much.

2. State Pension to increase

Retirees will get up to £230 extra a year in their state pension from April next year.

This is down to the triple lock system, which means pensions increase every year in line with inflation, earnings, or 2.5% – whichever is highest

The 2.5% state pension increase was expected to be confirmed after the consumer prices index (CPI) level of inflation reached 0.5% for September.

Meanwhile, earnings have been hammered this year due to the coronavirus crisis.

This is the fourth time the 2.5% triple lock has kicked in since the policy was introduced in 2011.

The move means the new state pension will rise by £4.40 a week to £179.60 in April next year – an increase of £228.80 over the year.

2. Tax hikes

Throughout the pandemic, Sunak has hinted at hiking up taxes by spring to tackle Britain’s spiralling Covid debt.

So far, only a handful of details have been confirmed or hinted at but these are some of the changes that you should look out for.

Council tax rises: The Spending Review fine print revealed that councils have permission to raise taxes by up to 5% next year.

This means the average council tax will rise by £109 for the year from April 2021 to April 2022.

Capital Gains overhaul: 2021 could see an overhaul of capital gains tax after Sunak ordered a review of the tax as the Government looks for ways to plug the black hole in the nation’s finances.

Personal Allowance increase: Personal allowance – the amount you can earn each year tax-free – will rise from April 2021 based on CPI.

The £70 increase, confirmed to The Sun by The Treasury, was also hidden in the Spending Review small print.

It means basic-rate taxpayers (those earning between £12,501 and £50,000) will earn an extra £14 a year.

Meanwhile, the threshold for higher-rate taxpayers will increase from £50,001 to £50,270, the Treasury said.

It means they’ll get a maximum pay boost of £68 a year, the Low Incomes Tax Reforms Group (LITRG) has calculated.

3. Rail fares to increase

Commuters in England, Scotland, and Wales are set to be hit with ticket price hikes of 2.6% in March in line with the Retail Price Index (RPI) measure of inflation.

Train fare hikes usually happen in January but have been delayed until March this year due to low passenger numbers.

The hike would see the price of an annual season ticket from Brighton to London increase by £129.48 to £5,109, while a season ticket from Barrow-in-Furness to Preston would rise by £116 to £4,582

In real terms this is the smallest increase in four years but the increase marks the first time fares have been increased by more than the rate of inflation since 2013.

5. Help to Buy restricted

The Help to Buy scheme has been a big boost for the housing market in recent years, allowing people to get onto the ladder with just a 5% deposit.

Under the scheme, the government will lend you up to 20% – or 40% in London – of the purchase price interest free for five years.

It is currently available to anyone purchasing newly built homes but from April 2021, the scheme will be restricted to first-time buyers only.

The maximum property price will also be lowered from the current £600,000 to the average first-time buyer price tag in the local area.

In the North East of England, this means first-time buyers will be capped at buying a property for £186,100 if they want to use the loan.

6. Stamp Duty holiday

British homeowners have been taking advantage of a stamp duty holiday brought in to help boost the housing market during the pandemic.

There is currently no tax charged on the first £500,000 of any transaction, removing the Stamp Duty burden from the vast majority of purchases.

But the tax holiday is only available on property purchases completed by March 31 2021.

Despite calls from industry experts, there are currently no plans to extend it.

Meanwhile, buyers seeking to take advantage may well have missed their opportunity to get their sale completed in time.

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 rates are different in Scotland and Wales.

7. Furlough scheme ends

The furlough scheme – officially known as the Coronavirus Job Retention Scheme – will end in April 2021.

Workers on furlough get 80% of their usual salary for hours not worked, up to £2,500 a month.

While the Chancellor has extended the scheme several times this year, there are no plans it will continue past April 2021.

8. Energy bill price cap to rise

Gas and electricity bills could rise by £21 a year for households from the beginning of April, under new proposals by Ofgem.

The regulator has suggested increasing the maximum amount Brits can be charged on their bills to cover debts following the coronavirus crisis.

Ofgem said it’s considering a £21 per household hike to the default price cap when it next comes up for review, which would affect millions of households.

This would come on top of any other changes made to the amount energy companies can charge customers on their default rates.

The current price cap, which runs between October 2020 and the end of March 2021, is set at £1,042 per household on default energy deals.

Meanwhile bills for prepayment meter customers are currently capped at £1,070 a year.

The prepayment meter price cap is set to end in December 2020.

After this, customers will be protected by a prepayment cap level in the default price cap, which will remain the same until April next year.

The price caps currently help 15million households, of which 11million are on default tariffs.

Ofgem said the hike will help remove some of the pressure on energy companies who are facing high levels of unpaid bills as households struggle to keep up during the pandemic.

9. Increase to National Living Wage

Millions of workers are set for a pay rise after the Chancellor confirmed the national living wage will increase to £8.91 an hour.

The national living wage is currently £8.72 an hour and will rise by 19p to £8.91 – an increase of 2.2% – from April next year.

The wage boost will also apply to 23 and 24 year olds. Currently, the national living wage is only available to those aged 25 or above.

The Chancellor said full-time workers above the age of 23 will see their wages rise by £345 next year.

Payslips were expected to rise from £8.72 to £9.21 in April next year, but the increase is smaller due to the coronavirus crisis.

10. Increase to National Minimum Wage

The minimum wage in the UK will also increase on April 6, 2021, giving a pay rise to over two million workers.

The minimum wage a worker should get depends on their age and if they’re an apprentice.

The National Minimum Wage is the minimum amount workers under 23 (but of school-leaving age) are entitled to while the National Living Wage is what workers are entitled to if they’re over 25.

It does not matter how small an employer is, they still have to pay the correct minimum wage.

The increases to the National Minimum Wage will vary based on age bands.

The age bracket of 23-24 will see their minimum wage increase by 8.7% from £8.20 to £8.91 an hour.

Those aged 21 and 22 will be paid £8.36 an hour when the wage is raised by 2% from £8.20.

If you’re 18-20-years old, you will be entitled to a minimum wage of £6.56 – a 1.7% rise from £6.46.

For 16 and 17-year-olds, the wage will be bumped up from £4.55 to £4.62 – an increase of 1.5%.

Apprenticeship rates will be increased by 3.6% from £4.15 to £4.30 while accommodation offset will rise by 16p to £8.36.

11. Public Sector pay changes

Britain’S NHS staff will get a pay rise to support them after their efforts during the coronavirus crisis.

More than 2 million public sector workers who earn less than £24,000 a year will still receive a pay rise of at least £250 next year alongside the rise in the National Living Wage.

However, 1.3million public sector workers who earn more than this will face pay freeze.

12. Credit holidays end

The deadline to apply for coronavirus payment holidays for loans, credit cards, car finance and pay day loans was extended until March 31.

It comes as lenders have been offering payment holidays to people who have been unable to make usual repayments on their borrowing due to the pandemic.

Borrowers who haven’t already taken a payment break since July have been able to ask for one from their lender and it will last for up to six months.

These measures include having the debt interests and charges cancelled but it will be marked on their credit history.

While it’s better than missing a payment without speaking to your lender first, Martin Lewis previously warned that you should only apply for a holiday if you really need it.