The year 2021 is packed with major laws and changes which will affect your finances – here are the main dates.
Some of these changes might leave Brits better off but others might hit the pockets of struggling people and families if not prepared for.
And although 2021 should see the end of the coronavirus pandemic, the effects of the upheaval could be felt in the long term.
Here are some of the major changes which could affect you and your family.
- Self-employed grant deadline – January 29
Since the resurgence of the coronavirus the government has extended the help available to self-employed people whose finances have been hit by the pandemic.
A grant available under the Self-Employed Income Support Scheme is open for applications, but will close on January 29.
The grant is worth up to 80 per cent of average monthly trading profits, capped at £7,500 in total. It is paid in a single instalment covering three months.
- Self-employed tax payments deadline – January 31
If you are one of the over five million self employed people in the UK, you need to submit your self assessment and pay your tax bill by January 31, or face a penalty and be forced to pay interest.
If you do not comply HMRC has the power to collect your outstanding tax through a debt collection agency, or even take you to court.
Don’t leave this until the last minute, as different payments take varying amounts of time to clear, so you might need to make the payment at least five working days in advance.
- Scottish child payments begin – February 22
On February 22, Scotland’s new child payment scheme comes into force.
The scheme allows Scottish families who collect certain benefit such as Universal Credit, Jobseeker’s Allowance, income related Employment and Support Allowance, Housing Benefit, Income Support or tax credits to claim £10 per week per child under six.
- Rail fare rises – March 1
On March 1 rail fares will increase by 2.6% across the UK.
This was intended to happen in January, but was delayed due to coronavirus.
If you need to buy a new season ticket, it would be wise to do so before prices go up.
- Expected increase in capital gains tax – March 3
Although it’s too soon to know what will be included in the March 3 budget, it is expected that the government will be forced to raise taxes to pay for the mounting costs of coronavirus relief schemes.
One likely way that this hole could be plugged is through an increase in capital gains tax.
Rishi Sunak ordered a review of the tax in July, asking the Office of tax Simplification for advice on “opportunities to simplify” the tax and make it “fit for purpose”.
Capital gains taxes are currently charged at 28 per cent on the sale of second homes and buy-to-let properties.
An increase would mean that anyone selling an investment property, such as landlords, would have to pay extra to complete the sale.
- Increases in benefits payments – April 5
Although payments will fall overall due to the end of pandemic boost, standard allowances will increase slightly above pre-Covid levels from April 5.
The increase will depend on age, disability status and if you have dependants like children or if you are a carer.
A single person aged under 25 will have a standard allowance of £257.33, up from £256.05.
Those over 25 will be entitled to £324.84, up from £323.84.
The child element will also increase to £282.50 for a first child, up from £281.25.
Other benefits increasing in 2021 include the Carer’s Allowance rising to £67.70 per week, from £67.25 and the Widowed Parent’s allowance increasing to £122.55 from £121.95.
- Inheritance tax rules changes – April 5
By April 2021 married couples will be able to leave up to £1 million tax-free to their direct descendants.
The additional inheritance tax free “residence nil rate band” will rise to £175,000. To qualify a property must have been lived in at some point by the deceased, and be passed onto direct descendants, such as children and grandchildren.
The residential nil rate band is available on top of the existing inheritance tax free allowance of £325,000, meaning that individuals will be able to leave £500,000 free of inheritance tax.
If the first of a married couple to pass away leaves their estate to their spouse, the nil band rates can be passed onto the surviving spouse, meaning that upon their death their descendants may be left with a £1million allowance.
This is an important change for families with medium sized homes and savings, as they will now be able to pass on and benefit from their estates tax free.
- Lifetime Isa charge relaxation ends – April 6
From April 6 you will be charged 25 per cent if you withdraw money from your lifetime Isa, for any reason other than buying a first home or to use it as your pension.
To help people struggling financially due to coronavirus, in March the government lowered the charge to 20 per cent.
However this change is set to be reversed, so if you need to withdraw from your ISA you’ll need to do so before then.
- Changes to wages and income tax – April 6
In November Rishi Sunak announced that the National Minimum Wage and National Living will increase in April.
National Living wage workers over the age of 23 can now earn £8.91 per hour.
Workers aged 21 and 22 will see their wages go up to £8.36, and 18 to 20 year olds pay will increase to £6.56.
16 to 17 year olds will see their pay rise to £4.62, and apprentices can now be paid £4.30.
Income tax thresholds will also rise, which increases the amount you can earn before paying any tax.
The increase of 0.5 per cent will make the allowance £12,570 for basic rate taxpayers and £50,270 for higher rate taxpayers.
Good and bad news for public sector workers, as nurses, doctors and other NHS staff will be given a pay rise from April.
Other public sector workers have been hit with a pay freeze, but those earning under £24,000 is protected from this.
- Pension lifetime allowance increases – April 6
Currently, pensioners have to pay tax on their pensions if it exceeds £1.073 million. From April this allowance will increase to £1.079 million, an increase of 0.5 per cent in line with inflation.
This means that older savers will be entitled to an extra £1,450 to enjoy their retirement with.
- Furlough ends – April 30
The furlough scheme, which was enacted to protect the incomes of people unable to work due to coronavirus, is set to come to an end on April 30.
The scheme was extended in December because of the winter spike in cases, but because of the rollout of the vaccine it is expected to wind down.
Chancellor Rishi Sunak will announce the government’s next action to protect jobs in the upcoming March budget.