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Guide to 10 most important money changes in 2021

A young girl puts a coin in a piggy bank.   (Photo by Nick Ansell/PA Images via Getty Images)
Online trading platform Hargreaves Lansdown has outlined 10 of the most important money changes we can be reasonably confident in as we enter the new year: Photo: Nick Ansell/PA Images via Getty Images

The coronavirus pandemic has changed a lot of the ways we handle money thanks to rising unemployment across the country and a number of government measures and schemes introduced this year.

Unfortunately as we step into 2021 there is still a great deal of uncertainty in the air, exacerbated by ongoing Brexit negotiations and the fact that the chancellor’s budget has been delayed until March.

Online trading platform Hargreaves Lansdown has outlined 10 of the most important money changes we can be reasonably confident in as we enter the new year:

Government Coronavirus schemes change

The third self-employment grant will need to be claimed by 29 January which offers 80% of average taxable profits up to £7,500 and is paid in a single lump sum.

The government has confirmed that there will be a fourth grant, but it has yet to decide what percentage of average profits should be paid out.

So far eligibility for each grant has remained the same since the scheme started, and when restrictions have been lifted, the scheme has become less generous.

Furlough changes

The current scheme, where the government pays 80% of employees wages, runs to 31 January. The government plans to revisit the scheme during January to decide whether to cut its payment and expect employers to top up more of the scheme.

End of stamp duty holiday

The stamp duty holiday comes to an end on 31 March, however, if the economy is stalling at that stage this could be extended.

The holiday boosted a buying and selling frenzy at the end of the first lockdown, as stamp duty on all property up to £500,000 was removed. Activity drops off as we get to the end of 2020, Hargreaves said, and people may start to worry that sales will not be completed in time.

The end of the holiday will also mean less activity, and could mean prices fall too. The OBR is currently predicting prices will fall 3.5% during 2021 – and will fall another 2.6% in 2022.

READ MORE: Calls for UK stamp duty extension as 325,000 buyers 'set to miss deadline'

Energy bills rise

Accounting bill paper forms on the table closeup
The current default tariff cap ends on 31 March. Photo: Getty

The current default tariff cap ends on 31 March. It was introduced in January 2019, and is revised every six months. The past three revisions have pushed it down to £1,042.

The next change is expected to see the cap rise, as a combination of higher wholesale energy prices and Ofgem’s plan to allow companies to charge more to help cover unpaid debts as a result of the pandemic.

It will consult on the changes until 21 December and announce the new level in February.

Council tax hikes

In any year council taxes can rise up to 2% a year without triggering a referendum. However, next year Rishi Sunak has announced councils can add another 3% to pay for adult social care – so taxes can rise 5%. They can also add extra on top to pay for police services – which for Band D bills can be up to £15. The total rise in this bracket could be £106.

Potential taxes rises – the great unknown

Spending cuts and tax hikes could come as early as April, depending on the progress of the pandemic and the economic crisis.

After the OTS report, the front-runners are thought to be changes to capital gains tax and possibly changes in inheritance tax – with perennial speculation about pension tax relief cuts in the background. However, Sunak refuses to rule out changes to income tax, VAT and national insurance.

READ MORE: Self-employed face tax hike after £9bn bailout

The state pension will rise

Rishi Sunak has refused to rule out future changes to the pensions “triple lock” in the future, but in 2021 at least, it has been confirmed that it will rise 2.5%, after inflation came in at 0.5% in September and wage inflation at -1%.

If the government doesn’t change the measure, according to the OBR, the state pension is likely to rise 2.5% again in 2022 – as inflation and wage rises are expected to come in lower than this.

Benefits rise more slowly

Working age benefits, additional payments for people with disabilities, statutory payments and additional state pension will rise with September’s CPI – so 0.5%. For claimants on standard Jobseekers’ Allowance, that’s an extra 37p a week. The divide between the way the state pension rises and the way all other benefits do, is likely to put the Triple Lock under pressure in the coming years.

Watch: Why UK tax hikes may seem inevitable

The national living wage and national minimum wage rise

The national living wage will rise 2.2% to £8.91 an hour and will be expanded to slightly younger age groups – starting at 23 instead of age 25. This is expected to work out at an average of £345 more a year for someone in full time work.

The national minimum wage will also rise, and depends on which age band you fall into. During the year, the OBR expects wages in general to rise 1.2%.

READ MORE: Furlough pushed 2 million employees below the UK minimum wage

Unemployment peaks

The OBR has predicted that unemployment will peak in the second quarter of 2021 at 7.5%. However, the OBR is far from certain about this: it says it might peak at 5% if the economy bounces back faster than expected, or it could peak later at 11% if there’s a third wave of the virus next winter.

The other great unknown is Brexit. The OBR assumptions are based on a free trade deal, but as the deadline approaches without a deal agreed, it has also modelled the impact of moving to WTO trading.

This, it says, would mean unemployment peaks at 8.3% in the third quarter (5.8% if we bounce back from the pandemic quickly or 12.1% if there’s a third wave).

No fault divorce takes effect

The law has already been passed for England and Wales, so we’re just waiting for the courts to put the systems and processes in place, Hargreaves said.

One or more of the couple just needs to apply saying that the marriage has broken down, then they wait a total of 26 weeks, and the divorce is granted. By removing the need to apportion blame or agree divorce, it removes some of the acrimony from the process - which can lead to expensive arguments. And by removing the need to wait up to five years it stops the potential cost of delay.

Watch: What are negative interest rates