Autumn Budget 2021 predictions: what to expect on energy bills, NI, CGT and more

We round up the rumours and leaks around what is likely to be included by the Chancellor when he delivers his Budget speech.

Rishi Sunak, the Chancellor of the Exchequer, will be delivering his second Budget of 2021 today (27 October).

It will coincide with the end of the Spending Review, when the Chancellor will set out exactly how much public cash each of the Government’s departments gets.

As always there have been plenty of leaks about what is likely to make it into the speech, while all sorts of financial organisations have made their own predictions about what might be included.

Let’s take a look at what could be in the Budget, and what it would mean for your money.

National Insurance

This is one we already know about, but it’s sure to be mentioned in the speech itself.

Earlier this year the Government announced an increase to National Insurance contributions in the form of the Health and Social Care levy, with the aim of raising funds for both the NHS and to cover the costs of social care.

As we highlighted at the time, it’s a move that’s attracted a lot of criticism for essentially being a jobs tax, let alone the fact that it broke one of the Conservative Party’s key manifesto pledges.

However, as it was such a big move, it does make it extremely unlikely that there will be any further amendments to the personal taxes we pay on our incomes.

National living wage

Another one that's already been confirmed, the Government will boost the National Living Wage from its current level of £8.90 an hour for the over-23s to £9.50.

According to Chancellor Rishi Sunak, the 6.6% rise "ensures we're making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament".

Energy improvements

The UK is hosting the next UN Climate Conference, COP26, just a few days after the Budget, and the Government has already made a host of commitments about getting the nation down to 'net zero' by 2050.

As a result, it’s not a huge surprise that the Government has already announced that it will be introducing heat pump grants worth £5,000, to make it easier for homeowners to move to more energy-efficient options.

There may be further moves too.

Jayne Harold, environmental tax leader at PricewaterhouseCoopers, suggested that it could amend the VAT rules to make it easier for the 5% reduced rate of tax to apply to energy-saving measures installed by homeowners. 

”Using the VAT system to reduce the cost of investment would act as an added stimulus to upgrade the energy efficiency of the existing housing stock.”

VAT cut for energy bills unlikely

It’s not exactly a secret that we are in the midst of something of an energy crisis at the moment, with a succession of energy suppliers going bust.

It’s meant far more people are now trapped on their provider’s standard tariff ‒ which is always the most expensive ‒ just as we are heading into the most energy-intensive part of the year.

There had been talk in the build-up to today's Budget that Sunak was planning to cut the rate of VAT charged on energy bills below 5%.

The 5% mark was enforced by the EU, but since Brexit it’s not something the Government has to stand by, and given Sunak’s position as a Brexiteer it did seem a distinct possibility.

Sadly, Whitehall sources have told the BBC the move is unlikely to see the light of day.

Capital Gains Tax

The Government clearly wants to revamp the taxes we make on profits from our investments.

Back in July 2020, Sunak ordered the Office for Tax Simplification to run the rule over the tax, which resulted in a host of suggestions that included stripping away many of the reliefs in place as well as increasing the rates charged.

The OTS argued that by charging a lower rate of CGT than Income Tax, the Treasury may be ‘distorting’ the behaviour of taxpayers.

To date, Sunak has resisted following this advice, but the upcoming Budget may be his opportunity to do so.

Student loans

Student loans are poorly named really ‒ given you only start paying them back once you start earning above a particular threshold, they are more like a tax.

More people may be set to have to start paying back those loans though, with talk that the Chancellor wants to reduce that threshold, which is currently set at £27,295 per year. Lowering the threshold would mean people start paying back the loan earlier in their working lives.

Pensions reform

Historically, Chancellors have loved to indulge in a little tinkering with the pension system around Budget time. While it’s unlikely that there will be anything too significant, one area that is crying out for Treasury action is the ‘net pay anomaly’.

It’s something that we’ve covered repeatedly at loveMONEY, and essentially means that millions of low earners are being denied tax relief on their pension contributions simply because of an accounting choice by their employer.

It’s a ludicrous situation and one that the Government has already acknowledged and pledged to put right.

There’s no time like the present for acting on this particular issue, and ensuring that millions of people don’t suffer a more difficult retirement through no fault of their own. 

This also seems like a good opportunity to address its bonkers ‘normal minimum pension age’ plans.

Inheritance Tax

As with CGT, the Government has previously tasked the Office for Tax Simplification with looking at Inheritance Tax for measures that would make it a little more straightforward.

The accountancy experts at BDO reckon that the nature of this Budget provides the Chancellor with the perfect opportunity to introduce some of the ‘simplifications’ that were suggested ‒ which basically means stripping back some of the many reliefs and exceptions in place ‒ which would mean higher tax receipts for the Treasury without having to actually amend the headline rate or threshold at all.