How Rishi Sunak’s Budget will affect household finances in the UK

Rishi sunak budget uk
Rishi Sunak Getty
  • UK Chancellor Rishi Sunak has announced this year’s budget.
  • He extended the furlough job protection scheme and the cut to stamp duty while raising some taxes.
  • Here’s what the Budget means for household finances in the UK.
  • Visit the Business section of Insider for more stories.

Rishi Sunak unveiled the UK’s 2021 budget on Wednesday, introducing a raft of measures designed to shore up the economy as it emerges from the coronavirus lockdown.

Speaking in the House of Commons, the Chancellor pledged to raise corporation tax, extended the stamp duty holiday, and announced government grants designed to support individuals and businesses.

“Coronavirus has caused one of the largest, most comprehensive, and sustained economic shocks this country has ever faced,” Sunak told Members of Parliament.

“And by any objective analysis this government has delivered one of the largest, most comprehensive, and sustained responses this country has ever seen.”

Here are details of the biggest changes and how they might affect your household finances in the UK.

The furlough scheme has been extended to September

Job centre unemployment
BATH, ENGLAND – JANUARY 18: A street cleaner passes the Jobcentre Plus office on January 18, 2012 in Bath, England. Figures released today show that the UK unemployment rate has risen to a 17-year high increasing by 118,000 in the three months between September and November, taking the total jobless count to 2.685 million. (Photo by Matt Cardy/Getty Images)

The most headline-grabbing announcement was Sunak’s decision to extend furlough payments until the end of September. The decision, which will reportedly cost £10 billion, means the Treasury will continue partially to pay the wages of millions of workers who may otherwise have lost their jobs in the pandemic.

The decision to extend payments to September has raised eyebrows because the government’s “roadmap” for exiting lockdown states that all restrictions could be lifted as early as June.

But the government has repeatedly emphasized that lifting lockdown on June 21 is a best-case scenario, and the date could be pushed back if a new coronavirus variant hampers the UK’s vaccination efforts. The Treasury will also be keen to avoid a summer cliff-edge for businesses.

What it means for you: The government will pay furloughed workers 80% of their wages up to £2,500 until the end of June.  In July, the government will only pay 70%, with employers expected to pay the remaining 10%. In August and September, the state will pay 60%, while employers will pay 20%.

£20 increase to universal credit payments extended

London coronavirus
A crowded London street as seen on October 18, 2020. Matthew Chattle/Barcroft Media via Getty Images

The government will extend their temporary £20-a-week uplift to universal credit which was introduced last year to support poorer families during the pandemic. It comes after 50 charities warned that removing the payments would push thousands of families into greater poverty.

What it means for you: Those eligible for universal credit will continue to receive the £20-a-week boost to payments until the autumn, after which they remain scheduled to end.

The stamp duty holiday is being extended

Terraced houses in London

The stamp duty relief currently will be extended until the end of June, and tapered off until September. It had been scheduled to finish at the end of March. The tax break fuelled house price rises last year and the move to extend it will help those looking to purchase a house in the next few months.

What it means for you: Anyone who purchases a property by June 30 will only have to pay tax on the amount over £500,000. Those purchasing between July 1 and September 30 will not pay stamp duty on the first £250,000 of a property, double the usual level of £125,000.

Help for homebuyers

Boards advertising property for sale and rent are seen in York City centre, northern England, January 12, 2007.

The government will introduce a mortgage guarantee scheme designed to help people with small deposit payments get on the housing ladder. The scheme is designed to help first-time buyers purchase a property with only a 5% downpayment on the deposit of the house – something which virtually no mortgage lender currently offers. It will do so by giving government guarantees to lenders which offer 95% mortgages. Sunak said Lloyds, Natwest, Santander, and HSBC will be among those lenders offering those mortgages from April.

What it means for you: Currently it’s very hard to buy a house unless you can pay at least 10% or 20% of the value of a house upfront. The average UK property is currently valued at £231,068, said Nationwide on Tuesday, meaning first-time buyers could be frozen out of the market unless they have saved upwards of £20,000. Some buyers will now be able to afford the cost of an average house with savings of around £10,000.

Fuel duty will remain frozen

A man walks past a service station displaying the price of petrol and diesel in Hawkhurst, southern England January 29, 2016. The global oil price is hovering at about $US30 ($38) U.S. dollars a barrel. REUTERS/Paul Hackett
A man walks past a service station displaying the price of petrol and diesel in Hawkhurst, southern England January 29, 2016. The global oil price is hovering at about $US30 ($38) U.S. dollars a barrel. REUTERS/Paul Hackett

Fuel duty will be frozen for the tenth year in a row. The tax is included in the price that motorists pay for petrol and diesel, and currently stands at 57.95p per litre. The tax on petrol, diesel, and other vehicle fuel currently stands at 57.95p per litre.

What it means for you: Motorists won’t pay any more tax on fuel at the petrol pump than they currently pay. Fuel prices will continue to fluctuate for other reasons, including the cost of crude oil.

Alcohol duty frozen

Pub garden uk

Rishi Sunak said he would freeze alcohol duty for another year in a bid to support Britain’s pubs, many of which have been shuttered for much of the last year. 

It comes after the Chancellor last year scrapped a plan to hike beer duty – the tax paid by pubs and restaurants for selling alcoholic drinks.

What it means for you: Alcoholic drinks should become cheaper than they would otherwise have been once pubs reopen.

More help for self-employed workers

London
People walk past placards informing them about social distancing measures in London, England on February 1, 2021. Wiktor Szymanowicz/Barcroft Media via Getty Images

The Treasury will extend support for self-employed workers to 600,000 people who were previously ineligible for payments. Support will also be offered beyond the end of April, when it had been scheduled to end. It represents a significant extension to the Self-Employment Income Support Scheme (SEISS), which provides grants to self-employed workers. A fourth grant will cover the period between February and April, and there will be a fifth and final grant from May onwards. The fourth grant will provide three months of support at 80% of average trading profits. For the fifth grant, people will continue to receive grants worth three months of averafge profits. The system will be open for claims from late July.

What it means for you: The Treasury has widened its eligibility criteria for those able to apply for the SEISS. People who didn’t filed a tax return in 2018/2019 are now able to apply for financial support.

Self-employed support will also continue until September. A fourth grant will cover the period between February and April, and there will be a fifth and final grant from May onwards. The fourth grant will provide three months of support at 80% of average trading profits. For the fifth grant, people whose turnover has fallen by 30% or more will continue to receive the full 80% grant. People whose turnover has fallen by less than 30% will receive a 30% grant.

Personal allowances have been frozen

A woman wearing a face mask pushes a shopping cart at a Tesco supermarket in Hatfield, Britain October 6, 2020. REUTERS/Peter Cziborra/File Photo
A woman wearing a face mask pushes a shopping cart at a Tesco supermarket in Hatfield, Britain October 6, 2020. REUTERS/Peter Cziborra/File Photo

The Treasury will freeze the points at which people start paying basic and higher rates of income tax at £12,500 and £50,000 for at least three years. Freezing personal allowances and income tax rates effectively amounts to a tax hike because inflation pushes most workers’ salaries up every year. The Conservatives have hiked the personal allowance several times since 2010 to reflect those salary increases.

What it means for you: Most workers will pay income tax at the same rate as they do currently. There is no income tax due on the first £12,500 of any annual salary. After that, any further amount up to £50,000 is taxed at 20%. The portion of a salary above £50,000 is taxed at 40%.