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how will the budget affect your finances

How will the budget affect your finances?

In Parliament this week, Chancellor Rishi Sunak announced the 2021 budget, which he called the ‘budget for recovery’ so we’ve taken a look at how the budget announcement will affect your finances.

Furlough extended and further financial help for low-income households

It was revealed today that there would be a five-month extension to the furlough scheme, with the scheme now ending on the 30 September 2021.

The Chancellor explained to employees on furlough they would see no difference from the scheme and will continue to receive 80% of their wage until the scheme ends.

In addition to this, low-income households on universal credit would continue to receive a £20 per week uplift for a further six months.

The Chancellor also announced an increase of the national living wage to £8.91 from April

Help for home ownership

As was suggested last week, the Chancellor announced a three-month extension to the stamp duty holiday.

This means that those buying a residential home that completes before the 1 July 2021 will not have to pay stamp duty on properties valued up to £500,000. After this date, this threshold will then lower to £250,000 until the end of September, after which the stamp duty holiday will end.

In addition to the stamp duty extension, today a new mortgage guarantee scheme was announced. Under this scheme, the Government will offer an incentive of providing a guarantee on 95% loan-to-value (LTV) mortgages to lenders.

Traditionally, 95% LTV mortgage deals are aimed at first-time buyers as they only require a 5% deposit, and the Chancellor stated that many high street banks will offer mortgages through this scheme from next month including Lloyds, NatWest and Santander.

Income tax threshold frozen until April 2026

Workers will have their income tax threshold raised to £12,570 next year, after which it will be frozen until April 2026. For higher-rate payers, the threshold will increase to £50,270 next year and again then be frozen until April 2026.

The planned tax increase on alcohol and fuel has been cancelled, which will help consumers to keep the cost of living down.

It was also announced that inheritance tax nil-rate bands will remain at existing levels until April 2026. The value of gains that a taxpayer can realise before paying Capital Gains Tax, the AEA, will be maintained at the present level until April 2026. And the Pension Lifetime Allowance will remain at its current level of £1,073,100 until April 2026.

New retail savings product to help fund green initiatives

Keen to raise funds to help support the UK cutting greenhouse gas emissions to net-zero by 2050, the Chancellor announced that the Government will launch a retail savings product aimed at enabling savers to help fund green projects. Although no information was provided about the product, it has been suggested that it will be launched later in the year by National Savings & Investments (NS&I) as a green savings bond. Depending on the type of account that is launched, and the rate offered, it may help to kick-start the savings market when it becomes available to savers.

As well as this, the ISA tax-free limit will remain at £20,000 during the 2021/22 tax year and the Junior ISA tax-free limit will remain at £9,000 for the 2021/22 tax year.

Cashless payment raised to £100

Today it was also announced that cashless payments will be raised to £100 from their current level of £45. This is to try and encourage more contactless payments. This limit rise comes into effect immediately but may take some time for banks and businesses to have the ability to offer it to customers.

If you need help understanding what these changes mean for your business, please contact us here at The Hollies on 01743 790086 or email us at info@holliesbookkeeping.co.uk