The consequences of any Budget vary depending on your, or your business’s circumstances. Our last article unpicked the possible effects of the Corporation Tax rise and the new super deduction tax relief for businesses. And another Budget article focused on the implications of freezing income tax brackets.
Three positive outcomes for individual taxpayers in this one: increase to the National Minimum Wage, freeze on fuel and alcohol duties, and the continued help if you’re buying property.
National Minimum Wage
All levels of the National Minimum Wage are going up in the 2021-22 tax year. This is good news for taxpayers earning the National Minimum Wage. Your take home pay is going up. But perhaps not so good for the employers who are legally obligated to pay it.
The new hourly rates of pay will be:
- Apprentices: up by 15p to £4.30
- 16-17 years old: up by 7p to £4.62
- 18-20 years old: up by 11p to £6.56
- 21-23 years old: up by 16p to £8.36
- 23 and over: up by 19p to £8.91
There is some confusion between the National Minimum Wage and the National Living Wage. The Living Wage Foundation says that a ‘real living wage’ for most of the UK is £9.50 per hour – £10.85 in London. 7,000 employers already pay their employees according to these figures, which are voluntary. Instead of sticking to the mandatory National Minimum Wage that all employers must pay their staff.
To add to the confusion, the government call the over-23s minimum wage the ‘National Living Wage’. But this is not the same thing as the ‘real living wage’.
Freeze on alcohol and fuel duty
These are less headline grabbing elements of the overall Budget. But they’re important because they’re part of everyday living costs for a lot of taxpayers.
Chancellor Sunak said this about alcohol duty: “I can confirm that the planned increases in duties for spirits – like Scotch whisky – wine, cider and beer will all be cancelled. All alcohol duties frozen for the second year in a row – only the third time in two decades.”
And about fuel:
“And right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel. So the planned increase in fuel duty is also cancelled.”
Alcohol Duty
Alcohol Duty is worked out using a calculation that involved the Alcohol By Volume (ABV) of each type of alcoholic drink. That’s the number of millilitres of pure ethanol in 100ml of the drink.
Basically, the Chancellor said that this continued freezing of alcohol duty saves:
- 1p on a pint of cider
- 8p on a bottle of wine
- 2p on a pint of beer
- 30p on a 70cl bottle of Scotch
It’s also welcomed by our drinks industry as a whole.
CEO of the Wine and Spirit Trade Association, Miles Beale, said: “The decision to freeze wine and spirit duty comes as a huge relief for British businesses, pubs, restaurants and its suppliers following the crushing – and continuing – closure of the hospitality sector for months on end, during the pandemic.”
The other ‘sin taxes’, tobacco and sugar, are also frozen at last year’s rates.
Fuel Duty
This is the tenth year in a row that fuel duty is frozen at 57.95p per litre. 47% of the price you pay when you fill up your tank is, currently, tax. So any rise would have direct impact on household costs. With increasing concerns about the rising price of oil impacting the price at the pumps, this decision not to raise fuel duty has been met positively by all, except environmental groups.
Buying property
The reduction in Stamp Duty Land Tax is continuing until 30th June 2021, instead of ending at the end of March as originally planned. The nil rate band will be set at £250,000 until the end of September 2021. This is great news if you’re looking to buy and for the housing market as a whole industry.
There is also a new government initiative to help buyers with a limited deposit amount. If you can get a 5% deposit together, the government will underwrite a 95% mortgage on the rest. This is only for properties valued at a maximum of £600,000. This sounds like its just to encourage first time buyers, or boost new build sales. But there are no such restrictions to this new scheme. You do have to have a regular, provable income – as with any mortgage arrangement.