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The 2021 autumn Budget – what it means for your money

A look at the key takeaways from yesterday's Budget and what it could mean for your finances and investments.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Yesterday the Chancellor, Rishi Sunak, delivered the autumn Budget detailing the government’s tax and spending plans.

Here's what it could mean for you and your money.

This article isn’t personal advice. Tax benefits depend on individual circumstances. Investments can go down as well as up in value so you could get back less than you invest.

A Budget for inflationary times

George Trefgarne

One of the most significant assumptions of the Budget came from the Office for Budget Responsibility (OBR), the independent forecaster on whose numbers the Chancellor Rishi Sunak must rely. It expects inflation to average 4.4% next year, a big increase on its projection of 1.8% in March.

As we emerge from the pandemic, the economy is recovering much faster than expected, with the OBR predicting 6.5% growth this year now, compared to their 4% forecast in March.

On the positive side, gone are the fears of substantial job losses and deep economic scarring from Covid-19. These have been replaced by a much more positive outlook.

However, the chancellor had already announced a freezing in personal tax allowances – including income tax – so they no longer keep up with inflation. By 2026-27, these freezes in income tax allowances deliver him an additional £13.9 billion of revenue per year than if he had raised allowances in line with inflation, according to the OBR. That is not all. He has already announced a rise in corporation tax from 19% to 25% from 2023, raising a forecasted additional £25.7 billion per year by 2026/27. And he’s expected to raise a net £15 billion per year by 2026/27 from the new social care levy, a 1.25% rise in National Insurance contributions for both employees and employers.

The Budget is a culmination of measures which will take the tax burden to 36.2% of GDP by 2026-27, the highest since the 1950s, and public spending to 41.6% of GDP, the highest since the late 1970s. Changes of this magnitude show that the Conservatives under Boris Johnson have shifted the economy dramatically onto Labour’s traditional turf.

Despite his generous spending commitments, the Chancellor will meet the rules of his new Fiscal Charter – to reduce the national debt as a proportion of GDP excluding what the government owes to the Bank of England and to only borrow to invest – at the cost of a much higher tax burden. But climbing inflation combined with frozen allowances and previously announced tax increases, could leave many taxpayers feeling worse off, especially if inflation rises even faster than the OBR expects.

George Trefgarne is CEO of Boscobel & Partners, a political consultancy. Hargreaves Lansdown may not share the views of the author.

Universal credit taper cuts, council tax hikes and higher taxes

Sarah Coles, Senior Personal Finance Analyst

The Budget offered some relief for those on low incomes who are under horrible pressure from rising prices on all sides. However, despite none of them getting a mention in the speech, we still face the nightmare of rising taxes.

Part of this sleight of hand is about timing. The major tax hike had already been announced, with National Insurance (NI) and dividend tax both rising by 1.25 percentage points in April 2022. The more you earn, the bigger an impact this will have. But NI will add £180 a year to the tax bill for a typical basic rate taxpayer earning £24,100.

The personal allowance will stick at £12,570 in April, and every year until 2025/26, while the higher rate threshold will be frozen at £50,270. More pay rises, including the rise in the National Living Wage, will push more people over these thresholds, and leave them paying more tax.

The Chancellor also froze the capital gains tax annual exempt amount at £12,300, the pension lifetime allowance at £1,073,100, the inheritance tax nil rate band at £325,000 and the residential nil rate band at £175,000. Rises in the value of investments and properties will push more people over these thresholds too.

The Universal Credit taper currently withdraws cash from people on lower incomes faster than the effective tax rate of people earning over £100,000. So the cut in the taper is a welcome change. For those who are able to work more, it will help offset the impact of the withdrawal of the £20 a week extra paid at the height of the pandemic. However, this measure will only boost the incomes of 2 million people, meaning millions more will still be worse off.

Not announced, but buried in the Budget documents, was news that council tax looks set to rise. Councils will be able to raise taxes by 2% without a referendum, plus another 1% for social care.

Cancelling the fuel duty rise was a sensible move in our view after the price of petrol (per litre) hit a record high of 142.94p on Sunday. Duty already makes up 57.95 pence of the cost, and VAT another 23.80p, so it would have been incredibly difficult to justify hiking tax on fuel further at the moment. Unfortunately, for motorists this isn’t going to cut the cost of filling up, just avoids making life even harder overnight.

The Budget’s impact on shares – the winners and losers

Nicholas Hyett, Equity Analyst


Pubs are one of the winners from this year’s Budget.

As well as participating in the general freeze in business rates this year, the industry will also benefit from a year’s additional 50% relief for retail, hospitality and leisure properties.

The biggest long-term boost though is probably in changes to alcohol duties. As well as a generally simpler system, there was a freeze of duties for one year announced, and support for smaller local producers that are more likely to be sold in pubs. The government also announced cuts to duty rates on some draught beer and cider by 5% – taking 3p off the duty pubs pay on each pint. While the difference for consumers might be modest, the long-term benefits to pubs could add up to a sizeable sum.

On the downside, pubs will be hit with a significantly increased wage bill. The National Living Wage is set to rise by 6.6% to £9.50 per hour on 1 April 2022, with minimum wage workers also receiving an increase. Pubs, like retailers and lots of other hospitality companies, count wages as among their largest costs, and many employees are comparatively low skilled and low paid.

When it comes to individual companies well placed to benefit, it’s the ‘wet led’, drinks-centric players that are best placed. Wetherspoon is an obvious contender, but so too are other pub operators like Marstons, Youngs and Fullers.


Changes to air passenger duty appear to be more politically than economically motivated.

The government plans a 50% cut to air passenger duty on commercial domestic flights within the UK. But, we suspect to head off accusations that flying is environmentally unfriendly, has introduced a new “ultra-long-haul” band. This new band will mean higher taxes for flights of over 5,500 miles.

While cheaper domestic flights are probably a boost to short-haul carriers like Ryanair and Jet2, the announcement is unwelcome news for long-haul specialists like IAG’s British Airways.

Distance (miles) Air passenger duty (economy passengers)
Domestic £6.50
0-2,000 £13
2,000-5,500 £87
5,500+ £91

Long-haul players are already struggling with a slow and uncertain recovery in international travel. So an extra tax that makes long-haul trips more expensive, even if only modestly, is far from ideal.


While there was a lot of detail on increased government investment in housebuilding, there was relatively little touching on the housebuilders themselves.

That is except for confirmation of the rate at which the Residential Property Developer Tax will be charged. The tax was pre-announced, but we now know that it will be charged at 4% of all annual profits over £25m. That might sound like a negative, but shares in Taylor Wimpey, Barratt Developments and Persimmon all actually rose by about 2% following the announcement. That suggests to us that the market was expecting worse.

With the government planning to build 180,000 affordable homes and bring 1,500 hectares of brownfield land into use, clearly the outlook for housing in the UK continues to look bright.

Read next: Budget pensions news

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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