Today (3rd March 2021), Rishi Sunak presented his second budget to Parliament. As widely expected, the budget focused heavily on the continued economic impact of Covid-19.
The Chancellor confirmed several important continuations of support:
- The furlough scheme will extend until the end of September 2021 meaning that employees will continue to receive 80% of their salaries for hours they are not working.
- Support to the self-employed will be extended.
- Universal credit uplift also extended.
The Chancellor updated us on the expected growth in the economy which for 2021 is expected to be 4% and 7.3% in 2022. Borrowing in 2021 is estimated to be £355bn and £234bn in 2022. Unemployment is expected to peak at 6.5%.
The stamp duty cut will be extended to the end of June 2021. The nil rate band will then be reduced to £250,000 until the end of September 2021 when it will return to its normal level. These figures relate to stamp duty in England. At the time of writing, we have not had any detail relating to the Welsh equivalent known as the Land Transaction Tax (LTT).
During the budget the Chancellor also announced the return of 95% mortgages via government guarantee. This is a move that is designed to help more people get on the housing ladder.
The personal allowance will increase to £12,570 from 6th April 2021 with the higher rate of income tax starting at £50,270. The allowance will then be frozen until 2026. This means that if your pay increases after 6th April 2022, you will pay more income tax.
Tax on Goods and Services
Duty on fuel and alcohol have been frozen meaning no increases. The 5% VAT reduction in VAT aimed at supporting the hospitality and tourism sectors will remain in force until the end of September 2021.
From 2023 Corporation Tax will increase to 25% from the current level of 19%. The Chancellor will be introducing a new ‘Small Profits’ rate of 19% for business with profits of less than £50,000. For businesses with profits between £50,000 – £250,000 the rate of Corporation Tax will be tapered.
Capital Gains Tax
The current allowance of £12,300 will remain fixed until 2026.
The current allowances will also remain fixed until 2026. The nil rate band of £325,000 has remained at its current rate since 2009.
Pensions and the Lifetime Allowance (LTA)
There were no announcements relating to the state pension. There were also no announcements made relating to the annual allowance (the amount that you can save into your pension each year). The current lifetime allowance of £1,073,100 will be frozen until 2026. Whilst we have seen many changes to the LTA, in recent years this has been increasing in line with Consumer Price Inflation (CPI).
If you have any questions relating to the budget update or need advice, our wealth management team are on hand to help. Please contact Craig Butler on 02920 853750 or at email@example.com.