With the dust just settling on the 2021 Autumn Budget, it’s time to look at what the announcements actually mean. From the freeze on fuel duty to the National Living Wage rise, there are a few key headlines to dig into. Here’s what the main points mean in real terms.

The National Living Wage

After April next year, the rates for the National Minimum Wage are going up. These rates basically set the lowest pay people can legally earn in the UK. The scheme’s been running for over 20 years now and often gets confused with the National Minimum Wage. The difference is that pretty much everyone except the self-employed can get the National Minimum Wage, while the National Living Wage only kicks in if you’re 23 or over.

How will this affect me?

If you’re at least 23 years old, you’ll qualify for the new National Living Wage rate of £9.50 an hour (up from £8.91). If you’re younger than that, you’ll be on one of the National Minimum Wage rates instead:

  • 16-17: £4.81 per hour.
  • 18-20: £6.83 per hour.
  • 21-22: £9.18 per hour.
  • Apprentice: £4.81 per hour.

Universal Credit

There’s a change in the way Universal Credit payments are calculated. Up until now, the payments you qualify for have tapered off by 63p for each pound you earn over £515 in a month. Under the new budget, that “taper rate” is being cut down to 55p. Rather than having the new rate take effect when the tax year ticks over next April, the plan is for it to kick in no later than the start of December 2021.

How will this affect me?

According to Chancellor Rishi Sunak, the new 55p rate will see a single mum with 2 kids who rents her home and works full time on the National Living Wage better off by £1,200 a year. Obviously, it all comes down to your situation and earnings, but it means about 2 million people in the UK will be keeping more of their Universal Credit payments. Obviously, there’s still the end of the £20 uplift to take into account, but it could take some of the sting out of that.

Fuel tax

Tax on fuel has been basically frozen since 2010, despite the steady rise in road use, air pollution and greenhouse gas emissions. There was originally a plan to increase fuel duty this year, but that’s been scrapped now.

How will this affect me?

There’s been a fair amount of fuel chaos in the UK recently, with supply problems and skyrocketing prices. Freezing the tax on filling up will probably be a welcome move, but we’re all still nervously watching the prices change at the pumps.

Public Sector pay

Wages in the public sector have been a big issue for a while now – particularly when we’re talking about healthcare workers. We’ve been leaning heavily on the NHS during the pandemic, and the strain’s been a real problem. Back in November last year, Rishi Sunak froze pay in the public sector, but after April 2022 that “temporary pause” will be lifted.

How will this affect me?

Nurses, Armed Forces personnel, teachers and more could all stand to benefit from ending the public sector pay freeze. What it’ll actually mean in real terms remains to be seen, though. According to the Treasury, any pay rises will be based on recommendations from independent review bodies.

Business rates

The new budget sets out to establish what the Chancellor calls a “fairer and timelier” business rates system. Basically, the valuations will now be taken every 3 years, while the planned annual increase in rates next year will be scrapped. Also, business making improvements to property will pay no extra rates for 12 months.

The hospitality and retail sectors have been hit pretty hard recently, so the budget also slashes their business rates in half for a year.

How will this affect me?

The biggest change will obviously be felt in retail and hospitality, where business rates can sometimes account for up to half of total property costs. Overall, according to Rishi Sunak, the cut in rates in these sectors is worth close to £1.7 billion a year.

Other changes

Other highlights of the Autumn Budget for 2021 include:

  • A change in the way alcohol is taxed, meaning rates will depend on alcohol content instead of the broad category a product belongs to. If you’re a fan of sparkling wine, for instance, you could soon be raising a glass to the Chancellor since it’ll be brought down in line with other wines.

  • Draught cider and beer will be getting a 5% cut in duty, but don’t get too excited. The estimated price drop per pint will probably average out at about 3p – and the changes won’t kick in until February 2023.

  • Frequent flyers will be seeing a shift in their travel costs after April 2023, one way or another. A new “ultra-long-haul” air passenger duty band will hit long-distance travellers, while UK domestic flights will see their duty cut by 50%.

So, how are you feeling about the Chancellor’s handling of the country’s purse strings this autumn? Sound off on our social media at Facebook, Instagram and Twitter and keep checking back for more insights and updates from the UK’s top tax team at RIFT.

Whatever the budget means to you - make sure you're not missing out by checking if you're due a tax refund this year.