What could the 2021 budget mean for your finances?

The Chancellor announced the budget on 3^rd March 2021 to outline the Government’s financial plan for the coming year and beyond.

The announcement was highly anticipated by millions up and down the country, including workers, businesses and low-income households negatively affected by the Coronavirus pandemic.

The furlough scheme has been extended

The Government’s Job Retention Scheme (furlough) has been in place since March 2020 and it has proved to be a valuable lifeline for employees and employers alike.

The Chancellor has announced the scheme is to be extended until end of September 2021 which will help businesses ease back into trading as the lockdown comes to an end. Furloughed workers will continue to be paid up to 80% of their wages up to £2,500 for hours not worked until the scheme ends.  

Just like in 2020, employers will be asked to contribute to the wages of employees during the closing months of the scheme. From July, employers will need to contribute 10% of the furlough payments, then 20% during August and September.

Self-employed income support scheme remains

Self-employed workers have been supported by the Self-employed Income Support Scheme (SEISS). This has helped those who work for themselves receive up to three available grants to cover a loss in trading income.

It has been announced that two further grants are to be made available to self-employed workers to help cover average trading profits. The fourth SEISS grant will cover an additional 600,000 self-employed workers from February to April 2021 and the fifth grant (available in July) will cover the period of May to July 2021.

The SEISS grants will be awarded at a level based on the fall in trading profits:

• If you have had a fall of more than 30% of trading profits, you’ll receive an 80% grant
• If you have had a fall of less than 30% of trading profits, you’ll receive a 30% grant

Universal Credit uplift remains in place

The Universal Credit uplift of £20 a week (over £1,000 a year) has been a lifeline for millions of people who were either claiming before the pandemic or needed it to cope with a new reduction in income.

The Chancellor announced the uplift will remain in place for a further 6 months, beyond the end of the Government’s lockdown roadmap in June, to ensure low-income households are able to cope financially. The uplift is likely to be removed after 6 months, as businesses recover and unemployment shrinks, meaning people will earn more by the end of 2021. Those on older benefits like Jobseeker’s Allowance will receive a one-off £500 uplift which is a similar amount to the increased Universal credit payments over 6 months.

An increase to the National Living Wage

The Chancellor announced that the National Living Wage will increase to £8.91 an hour in April. The Government will also drop the minimum eligibility age of the top band from 25 to 23.

This means that 23-year olds will see a wage increase of 2.2% in April from £8.20 to £8.91 an hour. However, 25-year olds will only benefit from a 19p increase from their original £8.72 wage but those working full time on National Living Wage will see an increase of £345 a year. Other age groups will also see a slight income in their income.

Here are the new rates that come into effect from April 2021: