Budget 2021: what you need to know

Chancellor of the Exchequer Rishi Sunak has delivered the 2021 UK Budget, extending several coronavirus support schemes and outlining plans for the country's post-pandemic recovery.

Mr Sunak said today's announcements bring the government's total coronavirus spending to £407bn, and that 'huge challenges' lie ahead to address record levels of borrowing.

Other key takeaways from the Budget include a boost to tax allowances in the new tax year but freezes from then until 2026, a new mortgage guarantee scheme, and an eventual rise in corporation tax.

Here, we explore what all these things and more could mean for your finances.

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Tax thresholds will be frozen from next year

Income tax and National Insurance thresholds, which determine how much of your income is taxed, will increase for the 2021-22 tax year in April but will be frozen after that until 2026.

The tax personal allowance will rise from £12,500 to £12,570 next year. Then it will stay at that rate for five years. Similarly, the threshold at which you would pay the higher tax rate will rise from £50,000 to £50,270, where it will also be frozen.

Though this isn't technically a tax rise, it does mean many will pay tax on more of their income than they would have if the thresholds had continued to rise over the next few years.

• Find out more: income tax and National Insurance changes revealed

Listen: our experts discuss the Budget on the Which? Money Podcast.

Furlough scheme extended

The furlough scheme, previously due to end on 30 April, will now continue until the end of September. Anyone on furlough during that time will continue to receive 80% of their salary from the government, capped at £2,500 a month.

However, employers will have to contribute 10% from July and 20% in August and September towards the hours their staff are not working.

Millions of people across the country are still benefiting from the furlough scheme, so many will breathe a sigh of relief at this announcement.

• Find out more: Chancellor extends furlough scheme

More help for the self-employed

The Chancellor announced details of the fourth and fifth payments for the self-employed income support scheme (SEISS).

Self-employed workers have been kept in the dark about the fourth SEISS payment, which led MoneySavingExpert founder Martin Lewis to criticise the Treasury for withholding details until the Budget speech.

The fourth payment, which covers February, March and April, will cover up to 80% of average monthly profits and is capped at £2,500. The fifth and final payment of the scheme will cover May to September, and its size will depend on how much turnover you have lost over the period.

• Find out more: next SEISS grants confirmed

Universal credit boost extended

The £20-a-week universal credit uplift will be extended for another six months, after much campaigning for it to be extended or made permanent to avoid plunging families into poverty.

According to PA Media, 39% of all universal credit claims since 2013 were made last year.

Stamp duty holiday extension and first-time buyer mortgage boost

After much campaigning from the housing sector, the Chancellor has extended the temporary stamp duty holiday beyond its original 31 March deadline.

It will now last until 30 June in its current form, which offers 0% stamp duty on the first £500,000 of property purchases. The threshold will then be reduced to £250,000 for the three months from 1 July to 30 September, and rates will return to normal from October.

This comes after many had raised concerns that home purchases could collapse if the holiday ended abruptly this month.

Mr Sunak also confirmed plans for the government to guarantee 95% loan-to-value mortgages, which could help first-time buyers get on the property ladder.

As we've reported previously, lenders have been withdrawing low-deposit mortgages for months now, making it harder for people to buy their first homes.

To address this, Mr Sunak announced that the government will underwrite 95% mortgages on properties worth up to £600,000. Several major banks are said to be on board, and the deals should be available from April.

However, since low-deposit mortgages have high interest rates at the moment, and property prices remain high, some first-time buyers could still struggle.

• Find out more: stamp duty holiday extension and mortgage boost explained

Pensions lifetime allowance freeze

In another measure to raise funds for the Treasury, the total amount you can save into a private pension without being taxed will be frozen at £1,073,100 until April 2026.

Since most people's pensions are nowhere near this size, you're unlikely to be affected by this change. It's estimated that 10,000 pension savers will exceed the threshold over this period and become liable for a tax of 25% or 55% (depending on how they access their pension).

In other pensions news, the Budget documents confirmed the state pension will rise by 2.5% next tax year and the triple lock will remain in place.

• Find out more: pension changes announced in the Budget

NS&I 'green' savings bonds

The Chancellor dedicated some of his Budget speech to detailing plans for green investment. Notably, he confirmed the launch of a new savings product that will let individual savers directly invest in the country's green recovery from this summer.

A 'green savings bond' offered through NS&I will raise money for renewable energy and projects to help cut greenhouse gas emissions. So far, we don't know exactly what this green bond will look like, but more details are expected later this year.

• Find out more: Chancellor unveils 'green' savings bond

Corporation tax will rise... eventually

To help balance out the government's huge spending on coronavirus support, the Chancellor confirmed a much-rumoured corporation tax rise, bringing the rate from its historic low of 19% up to 25%. This would still mean the UK has the lowest corporation tax rate of the G7 nations.

The rise will only come into effect from 2023, and the Chancellor says just 10% of companies will have to pay this higher rate. This is because businesses with profits under £50,000 will still pay 19%.

• Find out more: tax changes announced at this year's Budget

Budget 2021: live updates as it happened

We covered the Budget live as the Chancellor delivered it. Read our updates below to see how it all unfolded.

13:27 - That's it!

Stay with Which? Money for analysis of everything that's been announced today, along with details of what the Chancellor didn't mention in his speech, but did include in the written Budget.

13:23 - 'Freeport' locations revealed

Eight 'freeport' enterprise zone locations have been announced in England. These are: Thames, Liverpool City Region, Solent, East Midlands, Freeport East, Plymouth & South Devon, Humber and Teesside. These areas will be special economic zones.

13:19 - Regional spending plans announced

The Chancellor has listed a number of plans to spend in Scotland, Wales and Northern Ireland, many of which involve green and sustainable projects. He's also announcing a new economic institution in Darlington.

13:13 - 'Green' savings bond confirmed

During a series of announcements about green investment, the Chancellor alluded to the NS&I's 'green' savings bond, which had already been announced. Find out more here.

13:10 - Alcohol and fuel duty increases cancelled

The Chancellor says he will freeze fuel and alcohol duty for a second year.

13:03 - Corporation tax rise

Mr Sunak says he will raise corporation tax from 19% to 25% from April 2023. This will still leave the UK with the lowest corporation tax rate in the G7.

Smaller businesses will not be affected, as companies with profits under £50,000 will still pay 19%. This means only 10% of companies will pay the higher rate, according to the Chancellor.

13:01 - Personal allowance frozen

The Chancellor will freeze the personal allowance and higher rate tax thresholds from next year.

Currently you pay income tax on anything you earn over £12,500. This will raise to £12,570 next year and stay at that level.

Mr Sunak will also freeze the threshold for the higher income tax rate once it rises to £50,270. It is currently at £50,000.

12:55 - 'Huge challenges'

The Chancellor is now turning to the country's level of borrowing. He says the Treasury has spent £407bn on Covid support.

12:52 - Treasury-backed mortgage support

The government will underwrite 95% mortgage on properties with a value of up to £600,000. It's not restricted to first-time buyers or new-build homes, like the Help to Buy scheme, but prospective buyers must still have a regular income.

12:51 - Stamp duty holiday extended

The temporary reduction in stamp duty land tax has been extended until 30 June 2021. Introduced last year to boost the housing market under lockdown, the holiday was due to end in a few weeks time on 31 March.

Many in the housing sector will be happy to hear this, as sales were expected to fall through if the 31 March expiry date was kept.

Then, the nil rate band will be £250,000, double its standard level, until the end of September.

12:48 - Apprenticeship incentives

Incentives to hire apprentices will double to £3,000. 'That's for all new hires, of any age,' said the Chancellor.

12:47 - Support for businesses

High street shops and hospitality businesses will be able to get 'restart' grants when they reopen later this year.

12:45 - Minimum wage increase confirmed

The National Minimum Wage and National Living Wage will increase for the 2021-22 tax year.

It will change as follows:

Previously, the top rate of minimum wage was only available for over-25s.

The government calls the minimum wage for over-23s the 'National Living Wage'. This is different from the concept of a 'real living wage', which works out a fair minimum people should be paid based on the costs of everyday needs.

The Living Wage Foundation says the UK's real living wage is £9.50, or £10.85 for London. Some 7,000 UK employers voluntarily pay this wage.

12:44 - Universal Credit uplift extended

The Chancellor has confirmed that the £20-a-week uplift to Universal Credit will continue for six months. This comes after warnings from the Work and Pensions Committee that ending the uplift would plunge hundreds of thousands into poverty.

PA Media reported in February that between March 2020 and January 2021, there were 4.5 million claims for Universal Credit. This is 39% of all Universal Credit claims since the benefit was introduced in 2013.

12:42 - Details of the fourth SEISS grant finally confirmed

Those relying on SEISS grants during the pandemic have been waiting since February to find out how much they'll be able to claim from the scheme's fourth payment and the deadlines for making a claim.

The payment covers February, March and April, and Mr Sunak has now confirmed it will cover up to 80% of average monthly profits. It will be followed by a fifth grant available from July for the next three months, which will work differently.

Before today, the Chancellor faced criticism from MoneySavingExpert founder Martin Lewis for making people wait.

The fourth and fifth grants will be available to people who filed tax returns last year.

12:40 - Furlough scheme extension announced

This was confirmed yesterday evening. We shared the details in our update at 10:33.

'Previously due to end on April 31, the scheme will now last until the end of September.

The BBC reports that furloughed employees would continue to receive 80% of their current salary, capped at £2,500 a month until the scheme ends.
Employers will be asked for a contribution of 10% from July and 20% in August and September towards the hours their staff do not work.'

12:37 - OBR economic growth predictions

Here are this year's economic growth predictions from the Office for Budget Responsibility, which the Chancellor is commenting on.

12:36 - 'Whatever it takes'

The Chancellor is recapping the damage the pandemic has done to the economy, and the Treasury's response to it.

12:34 - The Budget begins

Chancellor Rishi Sunak has stepped up to the dispatch box to deliver the 2021 UK Budget.

He's coming in fresh off a PR blitz to build hype for the announcement, which included a movie trailer-style video. Now the public will finally see if it lives up to expectations. Here we gou2026

12:00 - PMQs

Prime Minister's Questions is beginning in the House of Commons. In about half an hour, the Chancellor will be delivering the Budget. Prime Ministers usually stay tight-lipped during a pre-Budget PMQs, but we'll update this blog if Boris Johnson lets any Budget announcements slip.

11:40 - Contactless payment limit raised

With around an hour to go before the Budget proper, the Treasury has confirmed that the contactless payment limit will rise to £100. This will be the second rise in recent years, after the limit increased from £30 to £45 in 2020.

It's the biggest increase in contactless payment limits so far, more than double its previous level. Legally, the limit rise is in effect from today, but you won't be able to tap and pay £100 until firms have implemented the change later in the year.

10:50 - Furlough scheme extended until September

Good morning. We're starting our live blog early because the Treasury confirmed last night that the coronavirus job retention scheme will be extended in the Budget later today.

Previously due to end on April 31, the scheme will now last until the end of September.

The BBC reports that furloughed employees would continue to receive 80% of their current salary, capped at £2,500 a month until the scheme ends.

Employers will be asked for a contribution of 10% from July and 20% in August and September towards the hours their staff do not work.

00:01 - Budget day

Today's the big day. Come back here at around midday when our live blog will begin.