This week, Rishi Sunak unveiled the 2020 Spending Review (SR20), which sets out the current state of the economy, the future and what the government plans to do in the coming year.
There were a lot of mentions of macro-level investments, from foreign aid to green infrastructure, but also changes that will have a very real impact on people’s financial lives – most of it good, especially for those on lower incomes.
SR20 set out some clear benefits for those on the lowest incomes, including increases to the National Minimum Wage.
From April 2021, there will be the following increases in rates: 21 to 22-year-olds from £8.20 to £8.36 per hour; 18 to 20-year-olds from £6.45 to £6.56 per hour; 16 to 17-year-olds from £4.55 to £4.62 per hour; and apprentices from £4.15 to £4.30 per hour.
But crucially, the National Living Wage, which will increase from £8.72 to £8.91 per hour, will be applied to anyone 23 and over, meaning more young people will now benefit – previously it was only applicable for those who were 25 or over.
And while there is a public sector pay freeze, with the exception of the NHS, those earning less than £24,000 a year will see a minimum salary increase of £250 next year.
For everyone, Income Tax Personal Allowance and Higher Rate Threshold will increase in line with the September CPI measure of inflation for the 2021/2022 financial year. This was 0.5% and, while the government hasn’t set out the specific figures yet, they’re expected to be £12,570 (up from £12,500) and £37,700 (up from £37,500) respectively.
The same CPI will also be used to set National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions.
For those who have had a pay freeze, or even a pay cut, this of course means paying less tax in the coming financial year.
The only clear cost at the moment is that council tax could go up by as much as 5% next year.
Local authorities are able to increase their bill by 2% without a referendum and raise an additional 3% towards adult social care (taking care of vulnerable adults such as those subject to abuse or in care homes). The exact increases will of course vary from authority to authority.