Budget 2021: what it means for a range of incomes

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For customers

How Sunak’s measures on tax and benefits will affect single people, couples and those receiving pensions.

Single, no children

Unemployed

2020-2021 They receive jobseeker’s allowance of £74.35 a week (£58.90 if aged 16-24). Housing benefit eligibility will depend on the size of the property they rent and where they live.

2021-2022 As part of an overall increase to benefits of 0.5%, their jobseeker’s allowance has gone up to £74.70. Overall, they are just £18.20 a year better off.

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Single, no children

Normally earns £34,000 but furloughed since March 2020 on 80% pay

2020-2021 They pay £2,938 in income tax a year and £2,124 in national insurance. After both are deducted, they receive a net income of £22,138 a year, or £1,845 a month.

2021-2022 The personal allowance – the point at which they pay income tax – rises fractionally to £12,570, and the national insurance threshold is up too, meaning they are£22 better off this tax year. If their furlough ends in July and they resumee work on full pay, they will be £3,490 better off than last year.

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Single, one child

Earns £14,000, with benefits top-up

2020-2021 After tax and NI are deducted their take-home pay is worth £13,162 a year. However, the family also receives tax credits worth £4,642, plus child benefit of £1,095, giving a total family income of £18,899.

2021-2022 Post-tax salary is now worth a bit more, £13,184, while tax credits and child benefit rise by £63.35 to £5,800. They will receive the chancellor’s one-off £500 extra tax credit payment making them £585.51 a year better off.

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Single, one child

Income of £48,000 but furloughed

2020-2021 They were furloughed (on 80% of pay up to a maximum of £2,500 a month – £39,000 gross pay) for the second half of the tax year meaning they paid £5,298 in income tax and £3,540 NI, while child benefit is worth £1,095 a year. The family has a net annual income of £31,256.

2021-2022 If they are furloughed for the first three months of the tax year, and then restored to full pay, their post-tax income goes up to £33,244. This, plus the child benefit increase of 10p a week, means the family will be £3,087 a year better off.

* * *

Single, no children

Income £110,000

2020-2021 This high flyer pays £33,496 in income tax and £6,060 in NI, giving them a net annual income of £70,444.

2021-2022 They will pay £1.31 a week less in income tax but their NI bill will increase by £0.36 a week. This leaves them £49.16 a year better off – enough for a round of drinks at the golf club.

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Unmarried couple, both aged 45-55

First income of £55,000, second income of £31,000

2020-2021 They pay combined annual income tax of £13,195 and NI of £7,540, leaving an actual joint net income of £65,265.

2021-2022 They both pay lower tax although their combined NI bill is slightly higher. Their combined deductions fall to £20,663. Overall, their combined actual income is £71 more than last year.

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Unmarried couple, two children, one of whom is disabled

One income of £22,000

2020-2021 They pay a combined income tax/NI bill of £3,398 a year. They also receive tax credit of £7,611, child benefit of £1,828, and disability payments of £2,454. This gives a combined net income of £30,487.

2021-2022 Their income tax and NI liability fractionally falls, while their benefits rise by £113 a year. They also receive the one-off £500 tax credit payment, which results in them being £635 a year better off – the biggest non furlough increase.

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Unmarried couple, no children

First income of £52,000, second income of £18,000

2020-2021 This dinky (double income, no kids yet) couple pays a combined annual income tax bill of £9,395 and NI of £5,920 – leaving them with a disposable income of £54,685 a year.

2021-2022 Once the changes are applied, their income tax bill drops slightly to £9,312, while they will pay a combined total of £5,931 in NI. This leaves them with £54,757 to spend – £71 more than last year for a romantic meal out – hopefully soon.

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Unmarried couple, two children

One income of £90,000

2020-2021 The high earner pays a total of £29,156 in tax and NI. They are not entitled to keep their child benefit because they have one income over £60,000, giving a net annual income of £60,844.

2021-2022 The tax and NI changes mean they will pay combined tax and NI of £29,107, leaving them £49 a year better off – about the same cost as a family visit to the zoo.

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Married couple, two children

Both unemployed

2020-2021 They receive universal credit worth £256.41 a week plus child benefit of £35 a week, giving a total of £15,153 a year, not including any rent. They have greatly benefited from the extra £20 a week UC uprating announced in 2020.

2021-2022 Their UC goes up to £257.58 but only for the first six months of the year. From October it will go down to £237.58 once the extra £20 a week is removed. Child benefit rises by £1.32 a week. Overall they are worse off by £451.36 a year – by far the biggest losers financially.

Married couple, two children

One income of £55,000

2020-2021 They pay a combined income tax and NI bill of £14,456. They are also entitled to child benefit of £547.30 a year – half of what they would receive if their income were below £50,000. They receive a net annual income of £41,091.

2021-2022 The tax and NI changes mean they will see combined tax/NI deductions of £14,407. Child benefit rises a little, leaving them £51.76 a year better off.

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Married couple, employed, four children

One income of £29,000 (full marriage allowance transferred)

2020-2021 Because they earn less than £50,000 a year, they keep all of their child benefit worth £3,271 a year, plus child tax credit of £6,990. Once tax and NI are deducted (£5,388) they receive a total net income of £33,872.

2021-2022 Their benefits package is now worth an extra £115 a year. They pay £24.16 less tax and NI. The big boost comes with the one-off £500 tax credit payment. Overall, the family has £639 more to spend on trips to the pool this year.

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Married couple, one child

First income of £95,000, second income of £70,000

2020-2021 Our high-earning couple pay £52,013 a year in combined income tax and NI, leaving them with a joint net annual income of £112,987. No child benefit is due because they earn above the £60,000 threshold.

2021-2022 Income tax is £40,857 and NI is £11,058. The changes to the thresholds mean their tax and NI bill goes down £98 leaving them with an annual net income £98 a year higher.

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Married couple, one child

One income of £34,000 (full marriage allowance transferred)

2020-2021 The main earner pays a combined income tax and NI bill of £6,988. The couple receive full child benefit of £21.05 a week, giving a net annual income of £28,106.

2021-2022 The NI changes mean they will pay combined tax and NI of £6,964. Child benefit is also up a tiny amount, leaving them a little (£29) a year better off.

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Married pensioners, both in their 70s

State pension

2020-2021 Their joint state pension allowance and pension credit now stands at £265.20 a week, or £13,790 a year.

2021-2022 The pre-announced rise to pension credit means that our couple receives– £5.10 a week more – an increase of £265.20 a year.

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Single pensioner

Basic state pension plus private pension of £12,000

2020-2021 Their state pension is worth £134.25 a week, or £6,981 a year. They pay £1,044 tax on their private pension – no NI is payable – giving them a net income of £17,935 a year.

2021-2022 The uprating of pensions leaves them looking at a combined net income of £347.92 a week, an increase of £2.99. Overall, they are £155.36 a year better off.

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Well-off pensioner couple

State pension plus private pension of £60,000

2020-2021 The state pension is worth £268.40 a week. Their private pension is worth £48,504 a year after tax. It gives them an overall net income of £59,673 a year.

2021-2022 From April this couple’s state pension rises to £275.20 and after tax, the pension is worth £48,572. Overall, they are £347 to the good – the big pensioner winners.

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Single pensioner

New state pension plus a private pension of £8,000

2020-2021 Their state pension is worth £175.20 a week. Overall, their net income is £16,440 a year after they have paid income tax on their private pension.

2021-2022 Their state pension entitlement goes up to £179.60 a week. Overall, their net income rises to £16,639, leaving them a shade under £200 a year better off than in the previous year.

All figures supplied by Dan Rust of Turquoise Training. Tax rates in Scotland will vary.

 

This article was written by Miles Brignall from The Guardian and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.