TOMORROW is the start of a New Year, so we’ve taken a look at what changes are coming in 2021 that will affect the cash in your wallet.
The coronavirus pandemic has wreaked havoc on personal finances, so it is more important than ever to prepare for what’s to come.
Here’s 12 key changes you should look out for in 2021The New Year will see a range of changes from rail fares hikes to bigger tax bills.
But it’s not all bad news as the government has also promised to pump £7billion into the welfare system, meaning some benefits could increase.
Here’s everything you need to look out for going into 2021:
1. Boost to Universal Credit
This year, households on Universal Credit saw payments temporarily boosted by £1,040 (£20 a week) due to the coronavirus crisis until April 2021 – but it’s unclear if this will continue.
More than 50 charities and groups have since urged Chancellor Rishi Sunak to extend the support, and a decision is expected next year.
The support means that for a single claimant, who’s 25 or older, the standard allowance rose from £317.82 to £409.89 per month in April 2020.
The standard allowance is the amount that everyone is entitled to if they’re accepted on Universal Credit.
If the support isn’t extended after April 2021, Universal Credit claimants will see their payments fall.
In April, some Universal Credit payments will rise depending on individual circumstances like age, whether you have any disability and if you have children or are a carer.
For example, the standard allowance for single people aged under 25 will rise from £256.05 to £57.33, and from £323.22 to £324.84 for those who are older.
The child element is also rising slightly at the start of the new tax year.
The amount for a first child will rise to £282.50, up from £281.25.
Here’s the full list of Universal Credit benefits that will be rising and by how much.
2. State Pension to increase
Retirees will get up to £230 extra a year in their state pension from April next year.
This is down to the triple lock system, which means pensions increase every year in line with inflation, earnings, or 2.5% – whichever is highest
The 2.5% state pension increase was expected to be confirmed after the consumer prices index (CPI) level of inflation reached 0.5% for September.
Meanwhile, earnings have been hammered this year due to the coronavirus crisis.
This is the fourth time the 2.5% triple lock has kicked in since the policy was introduced in 2011.
The move means the new state pension will rise by £4.40 a week to £179.60 in April next year – an increase of £228.80 over the year.
2. Tax hikes
Throughout the pandemic, Sunak has hinted at hiking up taxes by spring to tackle Britain’s spiralling Covid debt.
So far, only a handful of details have been confirmed or hinted at but these are some of the changes that you should look out for.
Council tax rises: The Spending Review fine print revealed that councils have permission to raise taxes by up to 5% next year.
This means the average council tax will rise by £109 for the year from April 2021 to April 2022.
Capital Gains overhaul: 2021 could see an overhaul of capital gains tax after Sunak ordered a review of the tax as the Government looks for ways to plug the black hole in the nation’s finances.
Personal Allowance increase: Personal allowance – the amount you can earn each year tax-free – will rise from April 2021 based on CPI.
The £70 increase, confirmed to HOAR by The Treasury, was also hidden in the Spending Review small print.
It means basic-rate taxpayers (those earning between £12,501 and £50,000) will earn an extra £14 a year.
Meanwhile, the threshold for higher-rate taxpayers will increase from £50,001 to £50,270, the Treasury said.
It means they’ll get a maximum pay boost of £68 a year, the Low Incomes Tax Reforms Group (LITRG) has calculated.
3. Rail fares to increase
Commuters in England, Scotland, and Wales are set to be hit with ticket price hikes of 2.6% in March in line with the Retail Price Index (RPI) measure of inflation.
Train fare hikes usually happen in January but have been delayed until March this year due to low passenger numbers.
The hike would see the price of an annual season ticket from Brighton to London increase by £129.48 to £5,109, while a season ticket from Barrow-in-Furness to Preston would rise by £116 to £4,582
In real terms this is the smallest increase in four years but the increase marks the first time fares have been increased by more than the rate of inflation since 2013.
5. Help to Buy restricted
The Help to Buy scheme has been a big boost for the housing market in recent years, allowing people to get onto the ladder with just a 5% deposit.
Under the scheme, the government will lend you up to 20% – or 40% in London – of the purchase price interest free for five years.
It is currently available to anyone purchasing newly built homes but from April 2021, the scheme will be restricted to first-time buyers only.
The maximum property price will also be lowered from the current £600,000 to the average first-time buyer price tag in the local area.
In the North East of England, this means first-time buyers will be capped at buying a property for £186,100 if they want to use the loan.
6. Stamp Duty holiday
British homeowners have been taking advantage of a stamp duty holiday brought in to help boost the housing market during the pandemic.
There is currently no tax charged on the first £500,000 of any transaction, removing the Stamp Duty burden from the vast majority of purchases.
But the tax holiday is only available on property purchases completed by March 31 2021.
Despite calls from industry experts, there are currently no plans to extend it.
Meanwhile, buyers seeking to take advantage may well have missed their opportunity to get their sale completed in time.