With 2021 now underway many UK households will be planning their budget for the year ahead.
2020 brought many changes to household income as the UK battled the Covid-19 pandemic. From furlough pay to mortgage holidays, many people will have felt an impact to their finances, be that for better or worse.
For those looking to plan ahead and budget for 2021 you should account for any financial changes accordingly.
To help you correctly budget for the year ahead, Lowell have pieced together a list of helpful calculations, considerations, and tips to take note of when drawing up your 2021 budget.
With the UK set to continue working from home, it is important that you take any additional expenses into account.
Working from home full-time can cost an extra £5.05 per month1. This comes from additional heating and electricity requirements, as well as smaller costs attached to running the microwave or kettle. Brits planning on continuing to work from home in 2021 should factor these costs into their budget.
If you work from home regularly you maybe entitled to claim £6 per week in tax relief2
The UK government have introduced a scheme to help those working from home with any additional expenses. It is worth noting that you cannot claim tax relief if you choose to work from home, only if your employer has asked you too.
The tax relief covers water bills, heating, and home contents insurance. By claiming, it’ll help households save a little extra.
The average parking costs £1.10-1.65/hour3 (£3.00-4.80/hour in London), with the average 30-49-year-old spending £28.40 per week4 on public transport. With many being hopeful that 2021 will bring an end to lockdowns and restrictions, Brits calculating their 2021 commuting budget should consider how often they’ll be travelling, and budget for daily, weekly, or monthly mileage, parking, and travel passes accordingly.
It may be worth noting that if you do have to travel on public transport regularly, you may want to consider monthly or weekly passes to reduce the overall cost.
Those who spent 2020 furloughed should budget for extra income in their 2021 spend when easing of restrictions allows them to work again.
The average reduction in income for anyone under the furlough scheme was 20% of their wage. Over the course of a year this equals a reduction of 2.5 months worth of pay.
If you find yourself back in full time employment in 2021 you will want to make sure you equate for this extra income.
Whilst it is tempting to browse the online sales at this time of year, it is important to note the value of having even just a small amount of money set aside for any unexpected costs that may arise.
This is worth considering throughout the year as using funds you already have, where possible, to cover expenses, is always a much better option than taking out credit. Credit cards and loans often have high interest rates attached to them, meaning you pay more overall.
When reviewing your 2021 budget, try to look for ways to set aside even a small amount each month if you can as a contingency.
Homeowners who took a mortgage holiday in 2021 should get in touch with their bank for a repayment plan, which should be considered when calculating a 2021 budget.
Renters might be entitled to additional benefits if living with a reduced income. Those concerned about making rent payments should speak to their landlord directly.