Budget 2021: What is it and how will it affect me?

The headlines have been buzzing with budget-related updates lately, and truth be told there is a lot of information to follow. If you’d like to skip all the waffle and find out how it might affect you, then you’ve come to the right place.

What is the budget?

Let’s keep this simple. The budget is the Government’s way of telling us how much money will be taken from the taxes we pay, and what exactly they plan to spend it on. It can affect the average person in a number of ways as it can include direct changes to benefits and wages, ultimately changing your planned monthly or weekly income. If you’re on a tight budget and every penny counts, you’ll need to know about changes ahead of time.

Minimum wage changes

For those on the National Minimum Wage (NMW), or the National Living Wage (NLW), you can expect a small rise in the hourly rate.

The National Living Wage (for those aged over 23) will rise from £8.91 to £9.50 per hour.

The National Minimum Wage (for those aged 21-22) will be going up from £8.36 to £9.18 per hour.

For those earning the National Minimum Wage between the ages of 18 and 20, the rate will see an increase from £6.56 to £6.83, with a similar rise for the under 18s, from £4.62 to £4.81.

All of this will take effect from April 2022.

Naturally, these rises have been compared to soaring costs connected with inflation, energy price rises and even the fuel crisis. The true results of this remain to be seen. What we know for sure is that, even though the cost of things are rising, wages are too… a bit.

The budget and Universal Credit

There’s a lot of political and financial speak connected to this so let’s break it down. There was initially a £20-a-week increase to Universal Credit payments that was introduced because of the pandemic. This ended on 6th October 2021.

Now, the amount of Universal Credit (UC) taken from every pound someone earns will be cut from 63p to 55p. This is good news if you’re a lower earner claiming Universal Credit as you’ll take home 8p more of the pound you’ve earned.

For a lot of people though, this won’t amount to the same as the £20 uplift, so will be a loss.

Fuel prices and the budget

We’re all too familiar with the words “fuel prices” recently, as they hit a record high all over the country. Apparently, because of the situation, the budget won’t go ahead with any increases in fuel duty as originally planned.

Alcohol & tobacco duty tax

Drinkers can raise a glass to alcohol duty tax being frozen, at least for now. Though in 2023 it is expected that some changes will be made.

It’s a slightly different story if you’re a smoker. Tobacco duty rates on all these products will increase by Retail Price Index (RPI) inflation plus 2%. Confused? Let us explain. This means the price of a 20-pack will soar by up to 88p, and hand-rolling tobacco will jump by as much as £1.70 on the most expensive packs. A medium 30g packet will go up from £15.60 to £17.30.

Other ways the budget might affect you

Apart from wages and benefits being affected, many of the other changes are made to the community, which may or may not affect you directly. The budget proposes:

• investment in youth services to build youth clubs and community sports facilities, including 8000 new football pitches.
• more money for libraries, museums and theatres.
• a £2.6bn investment to be made to create 30,000 new school places for children with special educational needs and disabilities.

If you’re worried about how any of these changes might affect you and your monthly, weekly or day-to-today finances then head to our budgeting hub where you can find some great advice. From creating a budget to managing your family income, we’ve got you covered.